Private Blockchains Are Starting To Have A Significant Impact
Crypto coin purists often dismiss private blockchains as expensive undertakings that could have better be served by traditional databases. However, private companies keep rolling out the private blockchains all the time. Most of these projects are in the experimental phase, but they increasingly have real money at stake.
While these blockchains fall short of public blockchains ideals of resistance to censorship and trustless transactions, they are still useful to the development of the blockchain industry. While the crypto markets are in bad shape right now, there is a lot to be learned on how various transactions can be recorded in a shared ledger.
The Private Blockchain Matters
A good example came a month ago with a unique blockchain bond that is insured by the World Bank. The Commonwealth Bank of Australia also took part in this project. It involved the sale of a two-year bond worth 110 million Australian dollars to a group of seven investors.
It Cut the Cost of Bond Issuance
For a full, seamless, and real-time settlement, operations such as these will have to integrate some kind of digital coin. While progress is being made, digital fiat coin or stable coin that is accepted by major financial institutions is a long way off.
Despite this, by enabling the atomic settlement of the security transfer of the transaction, the World Bank experiment revealed that blockchain could help reduce the settlement problem. If adopted on a wide scale, the cost savings would be significant.
The World Issues about $60 billion in bonds each year. The reduction in underwriting costs and settlement and counterparty risk would be significant. This will leave the World Bank with more money to pursue the mandate of supporting development globally.
However, the impact is beyond the World Bank’s bottom line. The model could benefit the countries with which the WB works. It could lower the cost for these nations to issue or borrow for projects.
The World Bank last year launched a blockchain lab that will explore various development-focused use cases. It is taking a leading role in experimenting with it, which is significant given that it has a reputation of heavy bureaucracy.
In future, some kind of distributed ledger architecture will become the norm for all manner of capital raising. International development agencies are in a good place right now to drive progress. Unlike governments that answer to the people and company executives that worry about shareholders, the people at these development institutions have few conflicts. Even the UN is thinking about this technology. They claim that they see its long-term advantages once it can handle huge capacity with less volatility.
There Is More To Come
The good thing about the World Bank experiment is that there is likely to be more to come. They are currently working on four more events as part of the experiment. These are three six-month payment of interest coupons and the final maturity of the instrument when final interest and principal repayment disbursement are made.