October 13, 2017 | Written by: Slawomir Panasiuk
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The advent of the Internet and mobile technologies has resulted in the emergence of unconventional economies, and dramatic changes in human behavior. Just think how often we now check our phones to engage with friends, share experiences, and connect with businesses using mobile apps.
Digital transformation is forcing organizations to rethink their businesses in response to new emerging business models, such as peer-2-peer connectivity and crowd-funding. Digitization not only presents challenges, but also opportunities for the digital economy to become more inclusive, and to engage people in active participation.
One of the effects of the financial crisis in 2008 was a decreased trust for financial institutions, with its effects felt globally. This triggered a call for much greater transparency, but also greater inclusion across financial ecosystems, involving minorities as active participants in the market.
For the investment market, inclusion can be improved by fostering broader involvement of retail investors. With an increasingly global nature of investments, it is an ongoing challenge to grow investors’ engagement, with Annual General Meetings (AGM) having historically very low retail shareholders participation. Today, if an investor wants to influence any of the AGM decisions he or she has 2 options: Participate in person in an AGM, or engage proxies as their representatives.
What is required, is a secure and transparent means to allow shareholders to make their voice heard whilst still voting from a distance. Considering the potential benefits of greater shareholder engagement on the long term investment in Poland, the Central Securities Depository of Poland (KDPW), together with IBM, is using blockchain technology to secure remote participation and voting at Annual Meetings. The objectives are straight forward:
- To give investors the ability to view reliable and indisputable information about meetings;
- To provide investors with the ability to cast and manage their votes, as well as credible means to confirm their voting;
- To give regulators transparent access to the full history of annual meetings, agendas and voting results.
By using open source blockchain technology we can increase the efficiency and integrity of the Annual General Meetings and shareholder voting processes. It is a very positive step forward to bringing more trust and incisiveness to financial services and the capital markets.
KDPW found the IBM Blockchain Platform, built upon the Linux Foundation Hyperledger Fabric framework, to be the best blockchain technology to meet the complex business requirements of capital markets, and ideally suited to the business logic of the voting process. KDPW was looking for open source, open governance and open standard blockchain with smart contract capabilities as a key to addressing our capital market needs. We selected IBM, as they have the knowledge and practical experience to design, develop and manage scalable enterprise blockchain networks, with a focus on permissioned and trusted business to business blockchain networks.
Blockchain-based voting solution has the potential to be extended to other voting domains. A transparent voting process is crucial for society, so maybe it can benefit from secure and transparent modern technology? By casting votes as blockchain transactions, we can create a system which keeps track of the tallies of the votes. Everyone can agree on the final count.
Every participant can verify that no votes were changed or removed, and no illegitimate votes were able to be added because of fundamental blockchain characteristics. Voting solutions based on an immutable ledger might increase participation in voting. But what is more important, it might help to build the new face of capital markets.
Art courtesy of KDPW.