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The importance of Legal Identifiers for the Blockchain Industry

Blockchain Industry

An LEI (legal entity identifier) generates a code for legal entities or organizations in order to distinguish them from each other. Their information and transactions are stored in the code to show the reliability and authenticity of any legal entity. LEI is used by organizations that are involved in financial transactions.

What is the blockchain industry?

The blockchain industry is a database that stores information in the form of blocks. The blocks are attached to each other with a certain amount of information in each so that the integration could be possible. Every new information added will be in its own block; however, it will be attached to the old one.

The blockchain industry is unique as it stores data in a different way than regular databases. It’s safer; hence the chances of getting the data hacked, replaced, modified, or deleted are significantly less. It is the digitized system where the data of different organizations is stored, for example, healthcare, banking, government, telecommunication, payments, employees contact, etc.; organizations usually use blockchain databases for sensitive information, which needs extra protection.

Why is LEI important for the blockchain industry?

Although LEI has its own authenticity as the system is used globally by many legal entities, there are chances of default, theft, or fraud in the LEI codes. This problem can be solved by using the blockchain industry as a database for LEI code registration. Below are the reasons that make it vital for LEI to use the blockchain industry:

  • Decentralization: in LEI, the data can be shared, or a connection can only be shared with the help of an intermediary in between both the entities. However, suppose blockchain technology will be used. In that case, the decentralized system will let the entities contact or converse with each other easily without a need for a third party to be the representative of each.
  • Non-repudiation: as the data is visible to all the registered entities in the LEI ecosystem. Any entity can claim or alter your data. With blockchain integrated with it, your data will be safe and authentic as it will be a mutual agreement between all the candidates in the ecosystem. Hence, the alteration, modification, or any false claim by any party will not be possible.
  • Transparency: transparency is an essential factor while different organizations are working in the same ecosystem. Blockchain database provides the transparency of your and other entities data so that every participant is trustworthy and authentic.   
  • Authenticity: when LEI will be integrated into the blockchain databases, all the entities will be accountable to stakeholders and regulators; hence no defaulters can take a chance on fraud.
  • Resilience: as LEI contains sensitive and private information, so it needs protection from an outside source. Blockchain databases will provide security as their structure ensures no hacking or frauds to take place. Therefore, the data will be safe and protected.

How is LEI integrated with the blockchain ecosystem?

There are two ways LEI can be combined with the blockchain ecosystem, and they are:

  1. The blockchain can assist LEI to make it much safer and secured through its complex structure, making it difficult for external entities to interfere. This way will help make legal entity identifiers stronger.
  1. The second way is to assist blockchain through LEI. The financial data of legal entities that are stored in blockchain technology can be assessed on the basis of authenticity through LEI. Whether the data the legal entities have stored in the blockchain database is legitimate or not.

Conclusion

To conclude, if the legal entity identifier (LEI) works side by side, it will be beneficial for the organizations to keep their data secure and maintain the authenticity of the information stored. Whether the registered data is authentic or not, whether the LEI code renewal is generated for a particular organization, whether the registration has taken place or not. All of this information can be updated frequently with the help of blockchain technology. On the other hand, blockchain technology can take benefits from LEI by providing its customers that are legal entities extra services by ensuring the authenticity of the data in the ecosystem. After all, transparency strengthens trust.

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