The problem statement is this: In a real-time gross settlement payment system, transactions typically go through a single trusted party, often the central bank. The challenge MAS posed itself was: can we create a more efficient inter-bank payment and settlement system without MAS acting as the trusted party? This began Project Ubin – a collaborative effort among MAS, the Singapore Exchange, ten banks, six technology companies, and six academic institutions. Over the course of the project, more than 150 people were trained in DLT. Phase 1 of Project Ubin successfully demonstrated that banks are able to transact with one another on an Ethereum-based prototype without going through the MAS. MAS issued a digital representation of the Singapore Dollar – a central bank digital currency – and placed it on the distributed ledger for domestic inter-bank settlement. Phase 2 of Project Ubin – just recently concluded – successfully produced three software models that achieved decentralised netting of payments in a manner that preserved transactional privacy. The next step in Project Ubin is to extend the application to cross-border payment and settlement. Cross-border payments today rely on a correspondent banking network. Banks hold balances with one another and settlement occurs through the adjustment of these relative balances. There is counterparty risk, liquidity is split, and reconciliation is a major pain point. In cases where multiple correspondent banks are involved, transactions may take days and at high cost to customers.
This means that all parties in the blockchain can be sure that no one can unilaterally make changes without the signature of the others. Third, data are generated by smart contracts which always execute in the same expected way. The smart contract acts as an impartial judge. It executes contracts faithfully in accordance with the pre-defined contractual terms that all parties on the blockchain have agreed to. A blockchain is essentially a database that provides proof of who owns what at any given moment and an immutable record of all transactions. It is, in other words, a distributed ledger. Distributed ledger technology, or DLT, has the potential to transform many industries and economic activities. This goes well beyond the original application of blockchains to Bitcoins and cryptocurrencies. In fact, although crypto-currencies have attracted the most public attention, it is the broader applications of DLT that hold more promise over the short to medium term. Industry applications of distributed ledger technology DLT is particularly suited for industry applications where it is important to know the histories of ownership but there is no trusted central party or reliance on the central party is inefficient or costly. Take supply chain management for instance. DLT can provide the means for registering, certifying, and tracking the supply chain process at low cost. All goods will be uniquely identified and transferred through the distributed ledger, with each individual transaction verified, time-stamped, and encrypted in a transparent process. In financial services, DLT is being experimented with for a variety of applications.