Decentralized Blockchain Technology in Clearing of Payments and Transactions

Frederik Kaae Laursen & Thomas Foged Hansen

Student thesis: Master thesis


Blockchain technology has gained massive interest over the last couple of years, mainly because of the potential the technology offers. With features; decentralization, transparency, non-reversible, high speed, low cost, and the elimination of a trusted third party, blockchain technology can be applied in many industries and use cases. The financial industry is very aware of the potential and have invested huge amounts in the development of the technology. More institutions are already using the technology to proceeding international payments. Jack Dorsey, co-founder and CEO at Twitter, believes that: "The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin," From the perspective that banks are using the technology for clearing purposes, and major influencers like Dorsey believes in the technology, we want to examine blockchains ability to disrupt the modern clearing infrastructure. We define a blockchain as a system that are decentralized in any aspects, hence all the development and maintenance must be widely accepted by the network. At this time banks are using private- or consortium blockchains in their businesses. These branches of the technology are controlled by one or more individual entities hence we are not considering them as truly decentralized and therefore not blockchains. A decentralized blockchain have all the characteristics that the father of bitcoin, Satoshi Nakotomo, developed back in 2008. Particular the feature of performing peer-to-peer transactions without a trusted third party. We have been evaluating if blockchains are truly decentralized and trustless and furthermore what regulation the technology will have to satisfy in order to disrupt the modern clearing system. Our key findings in this thesis are surprising as we initially expected decentralized blockchains to easily disrupt the industry. Although there are plenty of obstacles the technology not yet can meet without further development. First of all, a blockchain is not truly without a trusted third party. This is due to the trust you must have to the blockchain developers, miners, nodes, code, exchanges and other users as there is no company behind to guarantee your crypto assets. We also investigate II blockchains ability to match the current system regarding speed, security and cost. Our analysis proves that blockchains are still in the early stages and are unable to match the requirements from both consumers and regulation. Furthermore, we analyse the consequences of having a fully decentralised currency. The impact of not having a central bank will influence the way fiscal and monetary policies are done, and thereby influence the national stability. Because of all the shortages the technology has, we believe that decentralized blockchains will be banned by law, but only until the technology is able to meet regulatory requirements. Otherwise the only solution is to introduce a trusted third party who will handle all personal information, why we are back to the question of a truly decentralised blockchain.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2018
Number of pages142
SupervisorsPeter Nordgaard Hansen