Blockchain Is Changing The Way The World Trades Stocks
By Alluva on Altcoin Academy
Even with modern-day trading platforms, it can take days for transactions to complete on the stock market. When time means money though, that time-frame is simply too slow. In order to get a competitive edge and increase efficiency, transparency, and accuracy, stock markets are increasingly considering blockchain integrations into their respective platforms.
In this article, we’ll see what this blockchain paradigm shift means for the stock market, why it’s happening, and explore some real-world applications of blockchain in trading.
How Blockchain Fits In Trading
Traditional financial services work with a centralized banking system, which means the entire process is slower, less efficient, and prone to regular failures. In other words, when one domino falls, all of them fall. By incorporating blockchain ledger technology into these financial services, players in capital markets can cut costs, downtime, and errors.
James, CEO of Alluva, agrees with this sentiment as well. According to him,
“Blockchain technology has the unprecedented potential to disrupt the stock market in terms of accountability, security, and transparency. Settlement times, a major pain point for traders all over the world, can be reduced to mere seconds by leveraging the decentralized and scalable nature of blockchain networks.”
This marriage between new technologies and traditional financial services isn’t something new. In fact, there’s an entire industry revolving around this known as FinTech — and it’s seeing explosive growth. By the year 2023, the industry is expected to be worth $305.7 billion at a CAGR of 22.17% between 2018–2023. Blockchain is part of the reason the trading world is experiencing this kind of explosive growth. The technology is finding its way into banking, real estate, investment management, and trading sectors with applications related to automation, anonymity, and cross-border transactions.
Adoption Rate Is Increasing
“Can Blockchain Change The Way We Trade Stocks?” isn’t really a question anymore because blockchain is already here and it’s already changing the way we trade. Some of the biggest stock markets and companies have already invested large sums into the technology too.
Let us look at a few reasons why blockchain is disrupting the world of finance and trading.
One of the biggest flaws in our current trading and financial system is that most of it are heavily centralized. This makes it prone to attacks, failures, and security breaches that can shut down the entire grid at once. There are also many operational limitations and inefficiencies because of third-parties and intermediaries.
Bitcoin, the first practical implementation of blockchain, was created after the 2008 financial crisis with the belief that a handful of institutions and people could not be trusted with the world’s finance.
Blockchain offers applications with decentralized solutions that aim to create an internal system of checks and balances.
Decentralization does not mean more work or oversight is required. In fact, the opposite is true. Due to the self-checking and self-validating nature of blockchain applications, automatic contracts and transactions can be queued and carried out automatically. Since they are controlled by pre-programmed logic, they will securely complete as multiple network confirmations are required for each transaction.
In its simplest form, a blockchain is just a ledger that records every detail of every transaction. Millions of users across the globe have access to this ledger. Furthermore, data can only be written to a blockchain when all validators confirm a transaction.
As a result, there is no one person or institution in charge of your assets.
NASDAQ Linq uses blockchain technology to successfully complete and record private securities transactions for Chain.com — the inaugural Nasdaq Linq client. NASDAQ also partnered up with Citi and Chain.com to create an integrated payments solution based on blockchain.
Australian Stock Exchange
The Australian Stock Exchange partnered up with American blockchain firm and developer, Digital Asset Holdings, to explore blockchain-based applications, especially for clearing and settling trades.
Japan Stock Exchange
JPX is working with IBM to develop a test environment based on IBM’s fabric blockchain technology to build blockchain-based applications that attract new investors.
London Stock Exchange
LSX is working with Nivaura to create a blockchain-based solution that cuts out middlemen from transactions. According to them, “the time to market for issuing bonds, loans, and equity will be cut by at least 60%”.
The stock market is seeing a lot of firsts in the way it operates as an increasing number of players look at ways to integrate blockchain with the end goal of increasing trading and the number of traders through a better experience.
Blockchain-based decentralized applications (DApps) are another method through which traders and investors that are starting to transition to new asset classes such as cryptocurrency obtain a unique advantage.
Alluva, for instance, is building the world’s largest analyst platform by incentivizing experts for accurately predicting the future potential of various assets. By offering a clearer view of public and analyst sentiment, Alluva aims to improve transparency in the cryptocurrency sector and, eventually, more traditional markets as well.
In conclusion, it is extremely likely that blockchain technology will soon touch every facet of the global finance industry, facilitating cross-border transactions, improving transparency in the stock market, and enabling financial inclusion.
For more interesting content focused on the cryptocurrency and blockchain industry, follow our Medium channel here. To make your first prediction on Alluva, check out our website here. Feel free to join in the discussion in our Telegram group here. Lastly, follow our Twitter account for the latest updates.