__Around the time when bitcoin__ and blockchains were starting to catch the attention of the mainstream investment world, a New York-based start​up called Digital Asset Holdings (DAH) was launched. Blythe Masters was at its helm. The Wall Street veteran is knowledgeable about a common problem many banks face: Getting incompatible financial databases to talk to each other. It’s costly, complex, and takes time. While it might seem that traders work at Red Bull speed in lightning-paced environments, the technology used to execute trades is remarkably old- Fashioned and slow.

Lots of phone calls are made, emails traded and even the occasional fax is still sent. It can take up to three days—T3—for stock trades to change hands via clearing houses such as the National Securities Clearing Corporation (NSCC). It’s a process known as ‘settlement lag.’ Every hour before settlement happens, when a trade precariously hangs between sale and purchase, increases the risk that the trade won’t go through. Obviously, it’s in the banks’ interest to close that lag time as much as possible.

From WHO CAN YOU TRUST? How Technology Brought Us Together and Why It Might Drive Us Apart by Rachel Botsman. Published in November 2017 by PublicAffairs, an imprint of the Hachette Book Group

Blockchains could help reduce the gap of the entire lifecycle of a trade from days to minutes, even to zero. According to a report by Santander InnoVentures, the Spanish bank’s fintech investment fund, by 2022 ledger technologies could save banks $15–20 billion a year by reducing regulatory, settlement and cross-border costs.

Digital Asset Holdings wants to be the distributed database handling these speedy transactions. And the who’s who of the world’s biggest financial names, including Goldman Sachs, Citibank and Blythe Masters’s old employer, JP Morgan, have ploughed more than $60 million of investment into DAH. Speed and efficiency are not the only qualities that make distributed ledgers attractive to banks. ‘Regulators will like that blockchain-based transactions can achieve greater transparency and traceability– an “immutable audit trail”,’ Masters says. In other words, it could help eliminate the kinds of fraud that come from cooking the books. It’s rather ironic that these words come from a woman who spent several months being investigated by the Federal Energy Regulatory Commission for a cover‑​up of energy-trading strategies. Masters was not cited for any wrongdoing and no action was brought individually against her. JP Morgan paid $410 million to settle and close the case, without denying or admitting wrongdoing.

On Wall Street, the race is on to embrace or control what could be either its biggest ally or its death knell. Where does the average Joe store their money? In a bank’s current or savings account or a safety deposit. But the blockchain could become a new repository of value. How do typical loans work? A bank assesses the credit score of an individual or business and decides whether to lend money. The blockchain could become the source to check the creditworthiness of any potential borrower, thereby facilitating more and more peer‑​to‑​peer financing.

How do typical credit cards and money transfer services work? They currently flow through a bank, but the blockchain could handle this exchange of value directly from person to person.

Consider traditional accounting, a multi-billion industry largely dominated by the ‘big four’ audit firms, Deloitte, KPMG, Ernst & Young, and PwC. The digital distributed ledger could transparently report the financial transactions of an organization in real time, reducing the need for traditional accounting practices. And that is why most major players in the financial industry are busy investing significant resources into blockchain solutions. They have to embrace this new paradigm to ensure it works for, not against, them.

A San Francisco-based venture called Chain is said to have raised more than $30 million in funding from big names such as Nasdaq, Visa, and Citi Ventures to develop open-source code for a distributed ledger. IBM, Wells Fargo, the London Stock Exchange, and others have joined forces with Digital Asset Holdings to develop blockchain software that is also open source, making the underlying recipe available to developers. Originally dubbed the Open Ledger Project (and later renamed Hyperledger), the joint efforts are being overseen by the widely respected Linux Foundation.

Goldman Sachs has recently filed a patent for its own cryptocurrency, its own version of bitcoin, called SETLcoin which processes foreign-exchange transactions. It is designed to run on the bank’s own private blockchain. This means the replicated ledger of transactions still sits behind the closed walls of the bank, centralized and guarded. It seems to defeat the very purpose of the technology, which is to create a single indisputable version of the truth, freely accessible to all, that could eliminate the need for the bank entirely. In the patent, Goldman describes SETLcoin as having the potential to guarantee ”nearly instantaneous execution and settlement“ for trades. It would mean all the capital the bank is required to keep in reserve, to hedge against the risk of transactions if they don’t settle, would be freed up.