Nasdaq, the second largest exchange in the world, has published findings of a trial on January 23 where blockchain technology was implemented for e-voting, announcing the Proof of Concept a “success” and shows that the technology behind Bitcoin is versatile, with applications beyond transaction settlements.
In February 2016, Nasdaq announced the partnership with the Republic of Estonia, stating that the country’s e-Residency platform would have a blockchain-based e-voting service to allow shareholders of companies to vote in shareholder meetings.
This platform was made possible by the collaboration with Nasdaq and Chain, with much of the e-voting system deriving from Chain’s smart contract technology. Due to the absence of smart contract support in the Blockchain API, custom scripts, as well as API modifications, were necessary.
The proxy voting process in the past historically was labor-intensive and fragmented, but thanks to new blockchain technology, the process should be more streamlined than before, allowing for increased security as well as swiftness in the voting process.
The result of using the technology; greater shareholder participation, an important factor as in the past AGM (Annual General Meetings) used to be high cost as well as involving little shareholder engagement. With the number of cross-border investors on the rise, the demand for a secure and resource efficient solution increased.
CEO of Estonian financial player LHV Group, a participant in the trial, Madis Toomsalu stated the company’s intention to use the final product in the future:
“It is a good initiative and has a lot of potential. Testing of the prototype was convenient and simple. If the future solution enables mobile ID authentication as well and the security is granted, then we would definitely consider using the product in the future.”
According to Nasdaq’s report, the Proof of Concept system is a function, with four web-based user interfaces. Able to be accessed by any user with an Estonian ID card or e-Residency card, the system now allows users to view info about the meeting as well as vote before or during the meeting. Also, they can use the system to transfer their rights to a proxy, monitor and recall the proxy if necessary, as well as review previous meetings and transactions with the permanent record the blockchain provides, which gives the technology its notoriety.
Feedback after the initial experience was overall positive, while a more mobile friendly process was requested by several. While e-voting may not be the next killer app, and Nasdaq acknowledges this, it is a practical and necessary solution with numerous applications globally. The Proof of Concept will be explored further within Nasdaq’s internal and client-facing solutions, with end-users envisioned to include a range of players including listed and non-listed companies, NGO’s and custodians globally.
“By leveraging blockchain technology we see enormous potential for greater efficiency and integrity in Annual Meeting and shareholder voting process, and this is a very positive step for our industry and for the kind of potential that blockchain continues to represent for the capital markets.”
Further work will be done on the platform to continue to improve its functionality, but no specific details or timeline has been announced at the time of writing.