Blockchain for data management
Between 2009 and 2013 DIAMAN was a SIM, which is a institutional Company authorized by Consob and Banca d'Italia, so as authorized intermediary, I was asked to get, between all the procedures, a Single computerized Database, nicknamed AUI which had to have qualities of immutability of the inserted data and it also had to save the exact date of the data insertion.
Needless to say that with the technology still common with intermediaries, these characteristics are easily circumvented and not at all immutable.
Sure, the software house that makes the centralized database tries in many ways to make it hard for the intermediary to modify data, but which of course can be modified by experts or by the software house itself in "delicate" cases.
Legislation also requires that the consultancy service given to the client happens through recommendations that have to be archived in an immutable way in the company's database.
When I asked my legal what the law meant for "immutable" he replied saying a PDF document.
This is no laughing matter, this is the actual state of technology used by all intermediaries.
Blockchain, this technology everyone's talking about, but that is honestly really hard to understand (some steps are honestly obscure to me) in reality shows the possibility of fulfilling this normative requirement.
Not by archiving the documents in the blockchain like many things. The blockchain isn't a big distributed database where people insert PDFs to archive them for the future.
If someone tells you something like that they're a "charlatan" (term often used by Giacomo Zucco which is one of the leading experts in Italy regarding this subject).
The Blockchain is a huge series of data blocks, regrouped like sequential log files (you have one even on your PC, try looking for it) where informations are archived as text strings in a encrypted way, so I can't archive images or PDF of the client's signed contracts, and I can't save the PDFs of the advices I provided him.
So how can I create a more secure and unchangeable management of data and documents?
First let's start from the reason why these documents need to be kept in an unchangeable way, which is if a contentious with the client or with the supervisory authority happens, because in case of issues regarding for example the suggestion provided to the client, if the intermediary provides a document and the client another, how can you establish who's right?
Do you think that, in case of contentious, if the intermediary provides a PDF to the judge claiming that it's unchangeable, the judge will believe him? No of course.
And this is where blockchain can help to solve the problem, in the blockchain you don't archive the document, but you archive instead a encrypted string representing it, called "hash", basically through a process of encryption the document gets reduced to a sequence of numbers and characters and this string gets saved on the blockchain occupying a few bits of space on the so called "distributed Ledger", which is the distributed registry that all miners around the world own.
How does it work?
In case of contentious, it's possible to interrogate the blockchain to extract the hash that represents the document subject of the dispute, so if you execute again the procedure to create the hash and the same string is the result then the document is authentic and original, but if even a single bit was changed in the document, then the hash will be completely different and you can be sure that the document isn't original.
Transparency, this is the purpose of the blockchain, all the world knows that for example DIAMAN has deposited a hash that specific day, but only DIAMAN or who possesses the private key is able to know its content, and only DIAMAN has in its archive the original document to compare.
Sure, it's a mange for the intermediary, because this way it can't cheat, but does that worry you? If you're intermediaries and it worries you then it would be better if you didn't do the intermediaries, because the intentions aren't really clean, if you have nothing to hide then this is a extraordinary tool to manage all the data with transparency, uniqueness and a sure date.
The world will get used to this improvement step by step.
Us of DIAMAN, thanks to the PHI project, are making this so that transparency and honesty will reign supreme in a finance world that surely needs to rediscover trust and full fairness towards the clients.