DISTRIBUTED LEDGER TECHNOLOGIES (DLTS): RECONCILING THE TRADE-OFF BETWEEN TRANSACTION EFFICIENCY AND FINANCIAL REGULATIONS

ABSTRACT

One aspect of human society that has set us apart is our unwillingness to trust others. This difficulty has led to a situation known as the prisoner's dilemma, in which trust can only be earned by frequent exchanges, a good reputation, or third-party enforcement. The requirement for more effectively enabled societies that can coordinate the processes necessary to support more sophisticated types of economic transactions is critical, given that society has become increasingly complex and institutions have changed. Distributed Ledger Technology (DLT) consequently tends to address the issues that traditional, institutionally focused financial governance faces. However, this new technology must strike a balance between "transaction per second" and worries about financial stability rooted in reputable, centralized financial institutions. This work discusses the challenges faced by centralized governance in an ever-growing society with emerging technologies, examines the consequences introduced by decentralized-governed DLT systems, and highlights the need for standards to balance the speed and ease of transactions with the trust associated with DLT and centralized financial governance, respectively.

Keywords: Distributed Ledger Technology, Transaction Per Second, Financial Governance, Decentralized Finance, Blockchain Technology.