By Charles Scerri, Charles Scerri & Associates, www.charlesscerri.com
As of this year, the Maltese Government will introduce a regulatory regime for Distributed Ledger Technology, Smart Contracts, Initial Coin Offerings and Exchanges.
You probably have heard of the term Blockchain but what is it? And how can this affect your business?
“Blockchain is a distributed ledger technology which uses a distributed, decentralised and shared public ledger. The ledger is verified and maintained by the computers ‘nodes’ participating in the network. Depending on the protocol of the Blockchain, the ledger is able to register financial transactions and information including documents to both physical and digital assets”.
Blockchain is carried out as follows:
*A P2P Network is a connection between multiple computers with the purpose of sharing information.
Key Features of Blockchain
- Traditional Banking can be very slow and settlement time often takes days to process. With Blockchain money, transfers are at near instant speeds. This is mainly because the need for a middle-man during the transaction process is eliminated
- Businesses might have a number of documents which require being stored in a place where they cannot be tampered and altered. Blockchain Technology can be used to preserve the authenticity of such documents. Once a transaction is stored onto a Blockchain it is timestamped and cannot be altered or deleted.
- Public Blockchain networks have various consensus algorithms. One of which, “proof of activity” is used to validate transactions. Here, nodes need to solve cryptographic puzzles and the first nodes that solve the puzzle are rewarded with transaction fees.
Benefits of Blockchain
- Allows two parties to make a transaction without the use of a third party.
- The data is immutable, auditable and provide the uncensored truth.
- Every node has a full copy of the ledger on their system, so it is virtually impossible to lose the data stored.
- Allows the system to track the movement of goods, their origin, quantity etc. This brings out a new level of transparency.
- Blockchain tends to be more secure because there is no single point of failure to shut down the entire network.
Limitations of Blockchain
- Blockchain is an innovative technology and may contain errors yet to be detected and resolved.
- As nodes in the Blockchain prioritise transaction with higher rewards, a backlog of transactions starts to build up.
- Companies may have to alter their whole operation in order to use Blockchain.
Malta’s Adaptation to Blockchain
- Malta has the benefit of being in a competitive geographical position with a robust financial services sector as well as being established as a knowledge-based economy.
- Malta provides a good number of opportunities in terms of investment for entrepreneurs.
- Malta will be the first EU country to launch a robust regulatory framework for companies using Distributed Ledger Technology.
- Binance and OKEx, the world’s largest cryptocurrency exchanges announced their plans to relocate and extend their offices to Malta and envision to employ over 250 workers.
Charles Scerri & Associates
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