Page 147 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

Usually only those with an appropriate cryptographic key can view or add to the data on a blockchain, which
may layer on permissions for different types of users where necessary. Anyone can, with the right tools, create
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a blockchain and decide who can see the data in the blockchain, or add data to it. Banks, governments, and
private entities are rapidly developing and implementing blockchain-based solutions worldwide. 10

Exhibit 1: Differences between centralized and distributed methods

A blockchain is shared as it does not reside in a central place. It is said then to be decentralized (distributed)
across nodes.

These innovations also prompt a number of challenges related to their implementation, including the nascent
(and often not yet properly stress-tested) nature of the technologies used; uncertain legal and regulatory
status; privacy and confidentiality issues; cultural changes in requiring users to have ‘trust’ in often anonymous
counterparties; scalability of the DLTs for mainstream use comparable to and exceeding existing non-DLTs
performing similar functional tasks; and the ability to link different DLTs together, where required.
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12
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It is important to note though that the vast majority of DLTs under development today use blockchain
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technology. When the technically-oriented press discusses financial technology (FinTech) developments, they
also use blockchain as shorthand for DLTs. Therefore, blockchain is used in this study as the primary exemplar
of DLT.
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An important example of the use of blockchain technology is the Bitcoin cryptocurrency, as seen in Exhibit 2.

9 See Section 1.3.
10 See Sections 2, 3 and 5.
11 A common concern is that current DLTs processes are much slower than what is needed to run mainstream payment systems
or financial markets. Also, the larger the blockchain grows, the larger the requirements become for storage, bandwidth, and
computational power required to process blocks. This could result in only a few nodes being able to process a block. However,
improvements in power and scalability are being designed to deal with these issues. See Croman, K et al (2015) On Scaling
Decentralized Blockchains, available at https:// goo. gl/ cWpQpF ; and McConaghy, T et al (2016) BigchainDB: A Scalable Blockchain
Database, available at https:// goo. gl/ IBcGv0 .
12 This is also known as interoperability.
13 There are, of course, a number of broader technical and other issues relating to DLTs and their inter alia advantages and disad-
vantages, as well as their legal, regulatory, security, privacy, and commercial implications. They are noted or discussed briefly but
are generally beyond the scope of this paper and will not be detailed in depth.
14 See Section 2 on the various other DLT designs.
15 Ki-yis, D & Panagiotakos, K (2015) Speed-Security Tradeoffs in Blockchain Protocols, available at https:// goo. gl/ Fc2jFt

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