World Bank launches world-first blockchain bond

• The World Bank has launched the first bond on a blockchain with the Commonwealth Bank of Australia.
• The World Bank has priced the world’s first public bond created and managed using only blockchain in a A$100 million ($73.16 million).
• Bond-i is the first blockchain bond offered to public and global range of investors.

What is blockchain technology?

• A blockchain is an anonymous online ledger that uses data structure to simplify the way we transact. Blockchain allows users to manipulate the ledger in a secure way without the help of a third party.
• A bank's ledger is connected to a centralised network. However, a blockchain is anonymous, protecting the identities of the users. This makes blockchain a more secure way to carry out transactions.
• The algorithm used in blockchain reduces the dependence on people to verify the transactions. This technology used for recording various transactions has the potential to disrupt the financial system.

How it works?

• Blockchain enables two entities that do not know each other to agree that something is true without the need of a third party.
• As opposed to writing entries into a single sheet of paper, a blockchain is a distributed database that takes a number of inputs and places them into a block. Each block is then 'chained' to the next block using a cryptographic signature.
• This allows blockchains to be used as a ledger which is accessible by anyone with permission to do so. If everyone in the process is pre-selected, the ledger is termed 'permissioned'. If the process is open to the whole world, the ledger is called unpermissioned."

Benefits of blockchain technology

• Disintermediation & trustless exchange : Two parties are able to make an exchange without the oversight or intermediation of a third party, strongly reducing or even eliminating counterparty risk.
• Empowered users : Users are in control of all their information and transactions.
• High quality data : Blockchain data is complete, consistent, timely, accurate, and widely available.
• Durability, reliability, and longevity : Due to the decentralized networks, blockchain does not have a central point of failure and is better able to withstand malicious attacks.
• Process integrity : Users can trust that transactions will be executed exactly as the protocol commands removing the need for a trusted third party.
• Transparency and immutability : Changes to public blockchains are publicly viewable by all parties creating transparency, and all transactions are immutable, meaning they cannot be altered or deleted.
• Ecosystem simplification : With all transactions being added to a single public ledger, it reduces the clutter and complications of multiple ledgers.
• Faster transactions: Interbank transactions can potentially take days for clearing and final settlement, especially outside of working hours. Blockchain transactions can reduce transaction times to minutes and are processed 24/7.
• Lower transaction costs : By eliminating third party intermediaries and overhead costs for exchanging assets, blockchains have the potential to greatly reduce transaction fees.

By: Vishal