Before the blockchain

In the spring of 1968, Wall Street nearly drowned in paper. Trading volumes had exploded, but every share that changed hands still required a physical certificate to be delivered, checked, endorsed and carried by courier from one office to another. Brokers’ back offices could no longer keep up. Certificates went missing, others were stolen, and trades remained unsettled for weeks. To give staff time to catch up, the New York Stock Exchange took an unheard-of decision. It closed every Wednesday for several months. Financial historians call this episode the paperwork crisis.

I begin this genealogy with that memory because it says everything. Financial markets have always been limited by the capacity of their ledgers. Each time a ledger gave way under the weight of trading, finance invented a new way of keeping its accounts, and each time that invention redrew the entire system. The blockchain belongs to this lineage. To understand it, you need to know what came before it.

The great dematerialisation

The answer to the paperwork crisis was the immobilisation of securities. Rather than moving certificates around, they were deposited once and for all in a central vault, and from then on entries were simply passed between participants’ accounts. The Depository Trust Company was born in New York in 1973 on this principle. In Europe, Euroclear had been founded in Brussels as early as 1968 to settle Eurobonds, and Cedel, the ancestor of Clearstream, in Luxembourg in 1970. These central securities depositories have become the invisible pillars of world finance. Today they hold tens of trillions of euros of securities.