Anyone operating in the fintech industry has to be living under a rock if he isn’t aware of the blockchain technology. In the span of a couple of years, blockchain technology has completely revolutionized the faces of a plethora of businesses but isn’t limited to banking, HR and energy sectors. So, it is about time that blockchain took on the stock trading industry. In addition to being able to back virtual currencies such as Bitcoin and Ethereum, blockchain has shown the potential to transform the way stock markets operate currently and the way financial data is stored and spread throughout the world.
Although blockchain technology is fairly new in the stock trading market, reports from around the globe indicate that it can affect stocks as much as it has already affected currencies.
Stock market giants such as New York Stock Exchange, Nasdaq, Deutsche Bourse have already started implementing blockchain technology for their transactions. Whereas, there are other reputable stock exchanges that have hired researchers to check the feasibility of making use of blockchain technology in the future.
Fundamentals of blockchain
Blockchain is a distributed ledger which consists of blocks where data is situated. Editing or altering the data is extremely difficult once it has made its way onto the portal. Each of these cells are bound together by makijustifyng use of the cryptographic methods.
Ever since the inception of bitcoin, blockchain has been put to the forefront morphing it into a platform which has seen drastic adoption. Startups such as Ethereum show how much potential the public blockchain has and how it can be harnessed to establish decentralized software.
What makes blockchain unique is the fact that without the mutual agreement of everyone on the blockchain a piece of information can’t be deleted, altered or added.
Use of blockchain technology in finance
The extent of blockchain innovation goes a long way past simply clearing and settlement of exchanges. In fact, blockchain can be exceptionally helpful for gathering pledges utilizing Initial Coin Offerings, alongside resource administration, and checking risk of company.
These features promote transparency, trust, quicker execution and a safer process which also lets the investors feel more secure while making any trades and performing any tasks related to finance.
If we already haven’t convinced you why blockchain is beneficial in the financial sector then read on below.
How blockchain technology can be harnessed in the stock exchange sector?
We can say with certainty that the most important benefit which blockchain will provide in the stock market is how it will expedite the settlement of trades. Stock market traders and brokers go through extensive procedures that take a lot of time to get done with and aren’t light on the pocket either. The reason why transactions take so long to complete is because of the involvement of multiple intermediaries. This is where blockchain comes in to make the trading process way more transparent, automatic and decentralized.
However, transactions and trade settlements aren’t the only factors that the blockchain technology will help in. This thriving technology will also aid in crowdsourcing and fund management, as well as tracking securities lending and examining risks. Ultimately, it will also help in reducing the cost which is added up due to the need of a middleman by completely eliminating the need for having one.
Nasdaq an early mover in the market
People who know about Nasdaq, may not be surprised to hear that it was one of the first few stock exchanges that adopted the bitcoin technology because Nasdaq basically operates somewhere in between finance and technology and it lets its customers safely browse through the market while using the power of blockchain.
Investors who have been operating in the stocks market for a while now are familiar with Nasdaq because it is the traditional investment market. In addition to that, Nasdaq has bagged a good name for itself when it comes to adopting new technology and staying on top of the trends. It is in fact one of the first stock markets that researched the feasibility of blockchain and incorporated it in its application. In 2015 Nasdaq launched its first private securities transaction by harnessing the technology of blockchain. Chain.com became the first company to utilize Nasdaq’s own Linq Blockchain ledger platform.
Although, the grass seems to be green in the blockchain world, there are a few things that still need to be figured out. Blockchain technology gives rise to concerns regarding finances and regulations. These challenges need to be resolved by the government, regulators and financial institutions. Another thing that should be considered is the security concerns that the implementation of blockchain technology will give rise to. For instance, China’s Shenzhen Exchange was misleading people by making them believe that they were offering blockchain based solutions which in reality they weren’t and had a very limited knowledge of.
You might be aware of the fact that China still hasn’t made cryptocurrencies legal, it has still accepted blockchain technology. In fact, you will be surprised to hear that China has excelled so much in the blockchain technology that it is safe to say that they have taken the lead. Not only that, there was a TV show hosted on a local Chinese TV channel which claimed blockchain to be better than the internet by a tenfold.
Although, the growth path of a new technology is generally equally painful, we can expect the blockchain technology to show us the same growth the internet has shown since 1990 up till now. In this day and age of technology only the strongest and most unique ideas survive so it is safe to believe that blockchain technology is here to stay and it might be the next revolutionary technology that we come across. There have been some very obvious reasons that make us believe that. Blockchain has already become a vital part of plenty of industries and it has the potential to transform every part of our life from the government to the society for better.