Blockchain and the Stock Market

Blockchain and the Stock Market

Naveen Joshi 02/05/2018 8

The blockchain technology is the future of finance having the potential to revolutionise marketplaces. Empowering the stock market with blockchain will help the financial sector overcome challenges faced by traditional market systems.

Investing funds in the stock market is one of key ways to raise money. According to the Stock Market Investing Statistics, 52% of Americans have their money invested in stocks, which highlights that more than half of the American population invest their money in stocks. With the traditional stock market systems, the stock market investors have to go through a tiring process, such as dealing with go-betweens, customs clearance, to name a few. However, with advanced technology like blockchain, the issues can be addressed efficiently. With its incredible features, blockchain can entirely revamp the stock market system. Various industries, including retail, manufacturing, medical, financial, are reaping benefits from blockchain. Changing the stock market with blockchain will change the entire role of participants, the process of investing funds, in a right way. Let us take a look at the challenges faced by traditional market systems.


Challenges Faced by Traditional Market Systems

The old model for the stock market industry has multiple issues that must be resolved at the earliest. The points below highlight the problems associated with traditional market systems:

  • Old market systems have a centralized ledger, which stores all the digital assets at a single location. If any data is corrupted, the entire data is lost.
  • Old systems are often tedious to upgrade.
  • A centralized database is expensive, since it requires mainframes. Moreover, a lot of money is wasted to repair the traditional methods, if the need be.
  • The traditional way of investing in stocks requires intermediaries. The participants have to spend a lot of their money for the stock investment processes.
  • A traditional system lacks transparency, where one participant is unable to view the decisions of other participants, resulting in information asymmetry.

The crisis has left significant enterprise like Lehman’s Brothers devastated due to the centralized database approach and lack of transparency. J. Christopher Giancarlo, Commissioner of Commodity Futures Training, said, “If an accurate [blockchain] record of all of Lehman’s transactions had been available in 2008, then Lehman’s prudential regulators could have used data mining tools, smart contracts, and other analytical applications to recognize anomalies. Regulators could have reacted sooner to Lehman’s deteriorating creditworthiness.”

Changing the Stock Market with Blockchain

With blockchain, instead of probing data with a centralized database, blockchain can offer decentralized database, which solves all issues associated with the old systems. The transactions work as follows:

  • Imagine, if an investor decides to make a trade
  • Blockchain contains a set of growing nodes, termed as blocks.
  • The digital transactions are performed with a blockchain network
  • The blockchain network validates the transaction, and any change gets reflected in all copies
  • After verification, the nodes are added to the previous set of blocks, thus forming a blockchain
  • New blocks are added to the previous blocks only after validation, thus completing the transactions securely

Blockchain eliminates the use of centralized hub by providing decentralized database, which reduces cost and eradicates the need for go-betweens. Blockchain serves a platform to transact digital assets securely and efficiently. Changing the stock market with blockchain will undoubtedly benefit the stock market industry with its incredible features.

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  • Patrick Vargas

    Blockchain's popularity is on the rise with financial instituations

  • Ryan Zambonini

    There is a wealth of opportunites to be explored in the blockchain industry

  • Callum Low

    More and more financial companies are making their way onto the blockchain scene as well

  • Zoe Greenwood

    Informative

  • Rodriguo Moreno

    Blockchain is not going to disrupt the operation of stock market for at least 5–10 years.

  • Jordan Humell

    The money will not be at the helm of one single transfer agent, owing to the distributive nature of the protocol.

  • Will Owens

    Privacy is the biggest advantage of using Blockchain, the secrecy around your identity is always maintained.

  • Harry McGovern

    The mining speed is low at present, but it will improve with advancement in technology.

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Naveen Joshi

Tech Expert

Naveen is the Founder and CEO of Allerin, a software solutions provider that delivers innovative and agile solutions that enable to automate, inspire and impress. He is a seasoned professional with more than 20 years of experience, with extensive experience in customizing open source products for cost optimizations of large scale IT deployment. He is currently working on Internet of Things solutions with Big Data Analytics. Naveen completed his programming qualifications in various Indian institutes.

   

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