The new buzz word of the last five years is disruption. We have seen AirBnB change the way the travel industry is viewed, Uber and Lyft change the way we get around, and Amazon continues to increase our expectations in retail. What might disruption in the financial industry look like? It starts and ends with blockchain.
An abridged excerpt from our white paper, available at www.stockchainglobal.com, helps explain why the current system — with its incumbent intermediaries, fees, and delays — exists and why Stockchain could revolutionize capital markets from top to bottom:
Susan has seen Tesla pop up frequently in her news feed, and is noticing more of the automaker’s cars on the road. She likes what they are producing and wants to buy some stock. From initial research she learns that a share of Tesla costs a little more than $305.00 USD, and decides to buy a share.
And so begins Susan’s entry into the labyrinth of capital markets.
Susan’s brother-in-law is a broker, so she asks for his advice. He is happy to help, but explains that she will be required to go through a lengthy brokerage process before she is able to purchase the stock.
Susan braves the signup process and paperwork to set up her account, eventually providing her required “wet” signature and original documentation through the mail. She asks her brother-in-law to place the order and he lets her know that it will cost $11.50 USD to process her order and that her settlement date will be another two to five business days on every transaction.
Susan is surprised that buying a stock worth only $305.00 will actually cost her $316.50 and take even more time to process. She wonders why the transaction costs are so high, and why on earth it would take two to five business days to buy a single share of stock.
Why is Something so Simple — Purchasing a Single Share of Tesla — so Complicated?
Susan’s brother-in-law explains that there is a long chain of intermediaries operating behind the scenes of her seemingly simple transaction all with one goal: to ensure that the trade is secure and that everyone gets what they expect out of it. The list includes:
Agents, broker-dealers, custodians, exchanges, clearing houses, market makers, and depositories — all of these intermediaries must review the transaction, and all must get their fee.
This seems ridiculously bloated to Susan, but she learns that the process must be followed in every. single. trade.
Susan thinks “How could something like this exist and how can it be fixed?”
Queue: Stockchain Global’s blockchain-based platform.
The Stockchain Platform: Flattening Finance
The Stockchain platform functions as a one-stop, secure, and efficient brokerage, clearing house, and exchange for both buyers and sellers — cutting out practically every unnecessary intermediary and fee along the way. Transactions on the Stockchain platform take minutes instead of days. And every transaction is recorded, immutable, and auditable from the moment it is effected.
Returning to Susan, if she wants to buy a share of any company that has tokenized shares issued on Stockchain, her purchase is nearly instantaneous and her ownership of the stock is always crystal clear. Because of the digital record captured on the underlying blockchain, such a tokenized stock has a verifiable history of its ownership beginning from the creation of every share.
Likewise, due to the nature of digital funds and crypto currencies, any trader can know that their sale will be instantaneous and verifiable. With those immutable and instantaneous characteristics, Stockchain erases all deficits of trust between a buyer and seller. In turn, that trustless environment practically eliminates the need for multiple incumbent trillion-dollar industries performing middle-man verification and recording functions.
Joe is VP of Marketing and Strategy at CloudApp. He is also the CMO of Stockchain Global and Advisory Board Member at Ylixr. He has over 10 years experience managing various areas of marketing including research, media buying, social, and overall strategy. His analyses have been featured in the New York Times, Wall Street Journal, CNBC, Associated Press, and Forbes. Joe holds a BSc in Finance and MBA in Strategy & Marketing from the University of Utah. He also has an Executive Degree in Entrepreneurship and Innovation from the Stanford University Graduate School of Business.