Blockchain is a decentralized ledger technology (DLT) that records transactions and provides secure and transparent verification of data without the need for intermediaries.
Blockchain technology enables a network of computers (businesses) to agree (consensus) at regular intervals on the true state of immutable ledger (transaction records, credentials, other information) which is distributed across all the computers.
For more information on how this works, read: Getting Started with Blockchain and Decentralized Technology.
Typically, capital markets technology presently uses disjointed IT and data architectures, is extremely complicated, and lacks uniform standards. This creates a continual need to reconcile data with massive systems and process duplication, leading to high costs and protracted time to execute tasks.
Storing and agreeing datasets of financial obligations and ownership forms the basic core of capital markets operations. Blockchain has the potential to transform capital markets, from the issuance of assets to clearing and settlements, blockchain technology can:
Blockchain technology can streamline the settlement and clearing process by reducing the number of intermediaries involved. In traditional systems, intermediaries such as custodians and clearinghouses can slow down the process and increase costs. By using blockchain, transactions can be settled in real-time, reducing the need for intermediaries.
Blockchain can be used to issue digital securities, also known as security tokens, which can represent traditional assets such as stocks, bonds, and real estate. These digital securities can be traded on blockchain-based platforms, which can potentially reduce the cost and time required for traditional securities trading.
Blockchain can be used to facilitate trade finance by providing a transparent and secure platform for trade finance transactions. The technology can help automate trade finance processes, reduce the risk of fraud, and increase the efficiency of trade finance operations.
KYC is a process that financial institutions use to verify the identity of their customers. Blockchain can provide a secure and tamper-proof platform for storing KYC data, which can reduce the cost and time required for KYC verification.
Blockchain can be used to enhance regulatory compliance by providing a secure and transparent platform for storing and sharing regulatory data. The technology can help financial institutions comply with regulations such as Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements.
To realize the benefits blockchain promises, many large financial companies are working on DLT-based solutions to enhance their capital markets infrastructure. For example:
It hasn’t all been plain sailing to date, which is perhaps why adoption has been slower than it might have been. The absence of uniform standards and practices in the implementation of blockchain technology is leading to project failures despite organizations assembling teams to leverage its potential.
Notable failures in blockchain implementations include:
Blockchain testing is crucial for ensuring the reliability, security, and accuracy of blockchain systems. Some of the critical elements of blockchain testing that need to be considered when designing a test strategy include:
Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller directly written into lines of code. Testing is critical to ensure the accuracy, safety, and reliability of Smart Contracts. It involves testing for various aspects such as functionality, security, and performance to ensure that smart contracts work as intended and do not have any vulnerabilities.
Consensus mechanisms are essential to ensure that blockchain networks operate as intended. Blockchain consensus testing involves testing for various consensus algorithms such as Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS). Consensus testing aims to ensure that the consensus mechanism used by the blockchain network is secure, reliable, and resilient against external threats.
Blockchain integrity testing involves verifying the accuracy and integrity of the data stored in the blockchain network. It includes testing for various aspects such as data immutability, consistency, and authenticity. Blockchain integrity testing aims to ensure that the data stored in the blockchain network cannot be tampered with and is reliable.
Integrating blockchain with enterprise systems can present unique challenges, such as compatibility issues and security risks. Integration testing involves testing the integration of blockchain technology with other systems, such as applications, databases, and APIs. It aims to ensure that the blockchain network is seamlessly integrated with other systems and is working as intended.
In conclusion, blockchain has the potential to rapidly bring about fundamental positive change in capital markets but only if applications of the technology are rigorously quality assured.
A successful blockchain implementation requires the aggregation of technologies into one ecosystem including, cryptographic security, data storage, consensus protocol, Web 3, dApps, digital assets like crypto etc. It is essential to have a clear understanding of the requirements and standards for each blockchain system and perform testing accordingly.
At Qualitest, we’ve partnered with clients working on blockchain projects right from early stages to implement their blockchain test strategy. Our blockchain testing services and blockchain application testing focus on blockchain integrity, crypto testing, DeFi testing, Web3 testing, Web3 penetration testing and dApps testing, with bigger picture scalability and vulnerability testing factored in too.
