Distributed ledger technology.

In plain English

Distributed ledger technology maintains a database across multiple parties so each holds a copy and all copies agree, without one operator being the sole authority. A consensus procedure decides which new entries are valid and in what order, and entries are chained cryptographically, so altering history would mean rewriting everything that came after it. Blockchain is the best-known design, but ledgers can also be permissioned, run by a known set of institutions. The appeal for finance is settling a transfer and its record in one step instead of reconciling separate books afterward.

01Why it matters

Much of the cost and delay in clearing and settlement comes from institutions reconciling separate records against each other, and that is the specific problem this technology aims at, whether or not it ends up solving it.

02The math, step by step

Say five banks each keep their own ledger of the same 10,000 daily trades. Every mismatch triggers a manual check. On a shared ledger there is one record all five can see, so a break that used to take two days to reconcile stops existing rather than getting fixed faster.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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