Add shareholder voting to the list of applications for blockchain technologies.
Later this year, Nasdaq plans to record stockholders’ electronic votes on its own blockchain system for companies listed on one of its exchanges. By digitizing the entire process, it expects to speed and simplify the proxy voting process.
Blockchains — the best known of which is the public ledger of bitcoin transactions — are distributed records of events, each block in the record containing a computational “hash” of itself and of the previous block, so that all are connected like links in a chain.
A hash, or digest, is a short digital representation of a larger chunk of data. Hash functions are designed so that calculating (or verifying) the hash of a chunk of data takes little computing power, while creating data with a particular hash is computationally expensive.
Adding a new block to a blockchain involves repeatedly modifying the hash contained in the block, and calculating the hash function until a match is found. Going back in the blockchain to modify or fake a past transaction would involve performing that validation process on all subsequent blocks, before anyone could add a new, legitimate transaction to the end.
Nasdaq is already using the blockchain to store and vouch for the authenticity of documents using its own blockchain system, Linq. Last December, it used it to record Chain.com’s issuance of shares to a private investor.
Soon, though, it plans to introduce an electronic voting service for shareholders of companies listed on its exchange in Tallinn, Estonia.
Estonia is a good place to start because the country has a national digital identity system that is also open to non-residents and citizens of other countries. The system, called e-Residency, is used to authenticate access to online government services in the country, and Nasdaq plans to authenticate shareholders using the e-voting service.
This, combined with the use of its blockchain technology, will allow it to record shareholder votes quickly and securely, Nasdaq said.