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June 22, 2016
Webcast: CUs can benefit from blockchain technology
Distributed ledger technology – or blockchain – is a database that maintains a continuously growing list of data records that is resistant to tampering and revision, and it could be helpful to credit union operations, viewers of yesterday's free NAFCU webcast learned.
Credit unions could use this technology for smart contracts, such as indirect lending; smart assets, such as titles; settlements; payments; and digital identities.
John Best, CEO of Best Innovation Group, and Kirk Kordeleski, CEO of Edge Consultancy, explained to credit unions that while distributed ledger technology is the same as that which enables bitcoin, it can be used for far more.
For example, a credit union may send money to another credit union, and that transaction would be converted to an encrypted block. This block is then simultaneously shared on the credit union's network and verified by all involved. This "ledger" is then added to the chain that provides a permanent record of the event. The receiving credit union obtains the transaction and knows without question that the transaction came from the first credit union and is approved.
Best explained that each ledger can contain from one to thousands of transactions, or any kind of data. Entities that need the transaction information are identified through cryptography (a public and private key) for recalling the data.
As far as security, blockchain technology data is encrypted by the most current encryption standards; is broken up and spread across many nodes, or channels, also encrypted; and the actual transaction data is also encrypted by the sender for the receiver.
Best and Kordeleski also touted the CU Ledger Initiative, which is a concept to create a distributed ledger network for credit unions. The goals of the initiative include: removing barriers for entry for all credit unions; creating interoperability among all credit unions regardless of cores, third-party products and platforms; and reaching adoption and implementation sooner rather than later. Credit unions can learn more at CULedger.com.
This NAFCU webcast was provided free of charge and will remain available on-demand for a year through the association's Online Training Center.
Credit unions could use this technology for smart contracts, such as indirect lending; smart assets, such as titles; settlements; payments; and digital identities.
John Best, CEO of Best Innovation Group, and Kirk Kordeleski, CEO of Edge Consultancy, explained to credit unions that while distributed ledger technology is the same as that which enables bitcoin, it can be used for far more.
For example, a credit union may send money to another credit union, and that transaction would be converted to an encrypted block. This block is then simultaneously shared on the credit union's network and verified by all involved. This "ledger" is then added to the chain that provides a permanent record of the event. The receiving credit union obtains the transaction and knows without question that the transaction came from the first credit union and is approved.
Best explained that each ledger can contain from one to thousands of transactions, or any kind of data. Entities that need the transaction information are identified through cryptography (a public and private key) for recalling the data.
As far as security, blockchain technology data is encrypted by the most current encryption standards; is broken up and spread across many nodes, or channels, also encrypted; and the actual transaction data is also encrypted by the sender for the receiver.
Best and Kordeleski also touted the CU Ledger Initiative, which is a concept to create a distributed ledger network for credit unions. The goals of the initiative include: removing barriers for entry for all credit unions; creating interoperability among all credit unions regardless of cores, third-party products and platforms; and reaching adoption and implementation sooner rather than later. Credit unions can learn more at CULedger.com.
This NAFCU webcast was provided free of charge and will remain available on-demand for a year through the association's Online Training Center.
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