When the Australian Securities Exchange (ASX) decided to look into the distributed ledger technology for the replacement of 26 year-old CHESS\u2014used for clearing and settlement\u2014it had a very clear business case set.\nCHESS is a very good system, ASX CIO Dan Chesterman told CIO Australia, however was built with older technologies and the ASX realised a clear need to replace it.\nThis was back in 2015, a time where there was a lot of noise around blockchain and the ASX saw two options: to go for a traditional database or explore the DLT technology and its potential.\n\u201cThe ASX made quite a sensible decision of \u2018let\u2019s explore whether this technology could help us solve problems for our market\u2019,\u201d Chesterman told CIO Australia.\nWhat followed was an 18-month period where the ASX tried to understand if the selected partner, Digital Asset, could meet the functional requirements and make sure that the new system could meet its high standards for performance, scalability, stability, integrity, recoverability.\nAnd this is one of the first things to take into consideration. Chesterman stressed that enterprises looking into blockchain or DLT should first understand their non-functional requirements and that this specific technology space has been constantly evolving.\nTthere are different solutions and organisations should be sure they are picking the right one, he said.\nThe challenges\nThere are many exchanges exploring some kind of DLT technology, however the ASX seems a step ahead as it has gone passed the proof of concept stage and has a clear idea of where it wants to get with DLT.\nASX is entering into industry-wide testing from July and with plans to go live in April 2021.\n\u201cOne challenge is that when you start talking about distributed ledger technology, some people assume what you actually mean by that. So education and communication has been an important part of the process. And that\u2019s been with all of our stakeholders,\u201d Chesterman said.\nA space was built in the ASX building in Sydney where education sessions to help people understand what it is doing have been held. Being able to adapt to changes, especially as this is a new technology that continues to evolve, is another challenge.\n\u201cSo while we\u2019ve been exploring this project, there have been changes in the landscape, such as DAML becoming open source and the introduction of VMware. These are the important things for us to be able to build into our plan and the need to be able to recognise how to steer the programme, in an evolving technology space.\n\u201cIt\u2019s a marathon, not a sprint. We\u2019ve been running this programme for a number of years and that comes with its own set of challenges. And the point that I made earlier, the fact that at the end of the day our non-functional requirements ... the organisation\u2019s values to be always trusted, high integrity, low risk are really important,\u201d he added.\nThe ASX expects a couple of benefits from the work it is doing in the blockchain space: to replace an ageing platform with a contemporary, stable and resilient solution but also to create a platform that creates innovation opportunities.\n\u201cI think there is a long list of benefits. What I\u2019d like to see is organisations, not just ASX, creating solutions to sit on this infrastructure and create viable businesses that deliver value back to the end customers of this value chain, which are the issuers and the investors,\u201d Chesterman said.\nBlockchain today\nGartner predicted in 2019 that business value added by blockchain will grow to more than US$176 billion by 2025 and then exceed $3.1 trillion by 2030.\nChesterman told CIO Australia that there was a hype a few years ago when crypto currencies were at a peak and companies were talking about blockchain in their annual results to stimulate some interest.\n\u201cI don\u2019t think we\u2019re in that phase anymore. I think we\u2019re in a phase now of more enterprises getting their head around how this could potentially be really useful. And that\u2019s changing the sort of people that are involved in this space.\u201d\nHe believes that the industry is now in a stage where a small number of important projects are getting investment rather than being a period where CIOs are being pressured to just do something in this space.\nHe also said there are other examples of Australian companies doing interesting things in this space and that globally, exchanges are doing either proof of concepts or work in different ways.\n\u201cI\u2019d say the ASX is one of the ones [exchanges] that\u2019s taking a really meaningful, important set of assets, and exploring how this technology could be used to really drive a great impact in that in that space. And that\u2019s why it\u2019s particularly exciting,\u201d Chesterman said.\n\u201cI think it\u2019s really good to be focused on the use case and remain focused on your non-functional requirements. Make sure that you work with partners who are providing the sort of solutions that meet your needs, and do stay connected with the external environment as it continues to evolve.\u201d\nThe ASX has also set up a small business unit called DLT Solutions which deals with the inbound interest that it had from other parties to better understand exactly what it is that\u2019s possible with this technology. It is exploring the potential to provide some of the services it provides the cash equity markets into different use cases, outside the financial services industry.\n\u201cAnd we would genuinely like to see other organisations create solutions which can be deployed on that infrastructure,\u201d Chesterman added.