On Thursday, Wall Street’s bookkeeper announced that it had successfully tested blockchain technology to manage single-name credit default swaps (CDS) among four big banks: Bank of America Merrill Lynch, Citi, Credit Suisse, and JP Morgan.

In a credit default swap, one bank buys the debt owed to another bank with the understanding that if the debt holder defaults on their loan, the buyer bank will be compensated by the selling bank. In the years leading up to the 2008 recession, the buying and selling of credit default swaps was not watched by regulators at all, and as an NPR explainer described it in October 2008 , "If bad mortgages got the financial system sick, credit default swaps helped spread the illness worldwide."

The need for more transparency is where blockchain comes in. The concept of the blockchain ledger was developed and popularized by virtual currency Bitcoin, and on a blockchain ledger peer-to-peer transactions can be monitored by every entity that’s party to the ledger, theoretically resulting in more transparency. And recently Silicon Valley has pushed the finance world to appropriate the blockchain concept to make more traditional transactions more efficient, as well: if transactions are seamlessly recorded on a shared ledger, using a middleman to clear the transactions is no longer necessary.

So it’s no wonder that the Depository Trust & Clearance Corporation (DTCC), which is co-owned by banks and provides clearing and settlement services between banks, decided to run a small test of blockchain technology to suss out how and whether it could be incorporated on a grander scale. Besides Bank of America Merrill Lynch, Citi, Credit Suisse, and JP Morgan, DTCC also worked with Markit, a data provider that transmits the trades between buyer and seller, and with Axoni, a distributed ledger software developer.

With the Axoni software, banks were able to recreate a month of trades and update the terms of their trades on the blockchain ledger, creating “smart contracts” that contained "economic terms, as well as computational logic to manage permissions,” according to DTCC.

"The project also demonstrated the transparency which could be made available to regulators in real time, including individual trade details, counterparty risk metrics, and systemic exposure to each reference entity,” DTCC added. The company also noted that it did 85 tests of the Axoni software to asses "lifecycle functionality, integration with external systems, network resiliency, and data privacy."

The value of blockchain-recorded transactions is palpable to bankers. According to The Wall Street Journal, "Analysts at Autonomous Research say using blockchain could cut trading settlement costs by a third, or $16 billion a year, and cut capital requirements by $120 billion. A recent report by Citigroup forecast that automation including blockchain could eliminate two million banking jobs, largely in processing, over the next decade.”

Still, it will be years before blockchain ledgers are used in earnest. Changes that could add new complexity or poorly understood points of failure will be eyed suspiciously in the banking world. But several big banking companies have said they're looking into experimenting with the technology. Earlier this year, IBM announced that it would be developing "blockchain-as-a-service." In other words, applications for a shared ledger that could be applied to banking as well as shipping or logistics.