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Distributed ledger: Distributed ledgers can be public or private, depending on who can read the data. An unrestricted distributed ledger has, by definition, a public ledger, and on the other hand, a restricted ledger may have either a public or a private ledger. A Digital ledger can be programmed to hold any value like title, intellectual property, any type of financial instrument or transactions, and also to record business logic that has been agreed to between parties for financial transactions. This digital ledger can be held distributed at the network nodes either across a public or private network. This ledger represents an incorruptible truth that can be accessed, without compromising personal identity, because of the mass collaboration among the network nodes which validates any transactions before it is added to a block.Validation: Once a new set of transactions submitted by DLT users has been validated by a specific number of validators in the network, other users receive the update and change their local copy of the ledger accordingly. Validators need to check that the assets that would be moved by a transaction are available to the transaction originator according to their most recent information.Smart Contracts: Smart Contracts are self-executing contractual clauses that are stored on the blockchain and allows transactions between parties based on pre-defined rules without the inefficiency or risk of intervention created by an intermediary counterparty agent. A smart contract can be implemented for a number of accounts of different types and exchange of assets takes place as soon as an event triggers the application of these terms. For example smart contract can provide for automatic transfer of dividend and interest payments, collateral payments on occurrence of certain events like receiving of margin call and based on agreement clause related to such margin payments. As smart contracts are written or coded in the ledger itself, validation of their execution follows the same procedure as discussed earlier. However, it is still to be seen how smart contract written in programming code are enforced by the law and treated by various regulatory bodies. Cryptography: A digital signature is necessary to establish the ownership of the assets in the blockchain and encryption to protect the confidentiality of the data. Public-key cryptography allows the holder of a specific pair of private and public keys to: a) sign a message with a private key to allow any network participant to check – by using the corresponding public key – that he was the author, and b) receive a message signed by network participants with his public key and be the only person able to read that message.Privacy/security and scalability. Privacy and scalability is one factor that needs to be addressed before blockchain model can be successfully implemented. The privacy aspect is the most important factors when one deals with public (permissionless) blockchain network, and the open source community is working aggressively working on it to limit the access to private information and transaction. This is despite the fact that blockchain network by the nature of its architecture provides better security compared to traditional centralised model as it does not allow tampering with data in the distributed ledger once a transaction is recorded. Scalability will be a source of concern especially where it require processing large volume of data at a fast rate. Companies which are investing in pilot blockchain projects are trying to design a solution that will cater to the needs of the financial industry, especially in the capital market dealing with millions of transactions on a daily basis.

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