Blockchain technology has been one of the most innovative technological concepts over the last few years. Several announcements, covering various aspects where the distributed ledger technology can be used to disrupt a change in different businesses, have been made.
The economics industry is undergoing many seismic changes at present, with fintech, in particular, proving to be a significant disruptor. Blockchain has ignited curiosity among industries and sectors, especially in finance it has often been called “the future of financial services infrastructure”.
Various startups emerging from different industries of the world are experimenting with the distributed ledger technology to increase the efficiency of the current finance system.
Well, we strongly believe that for the early adopters of the blockchain, days to come will be glorious. Further, in this article, we will talk about how is the stock market going to be revolutionized.
Cutting out the Middlemen
A key benefit to blockchain technology is cutting out the middleman. In effect, because all transactions on a blockchain are validated by the community based on a numerical probability, the requirement of a trusted intermediary is unnecessary. Blockchain would allow you to have a decentralized stock exchange, without the need for a brokerage, clearinghouse, or arrangement process.
In general sense, after effect, the commission between the whole network is going to be drastically decreased profiting the stockholders and the stock holding/issuing company itself.
Automation of Post-Trade Events
Practicing blockchain and smart contracts to post-trade activities can eliminate the need for intermediaries, reduce counter-parties and operational risk while providing the infrastructure for faster trade settlement. Financial institutions can settle securities in minutes instead of days, with the major benefits being streamlined real-time settlement, improved liquidity, supply chain optimization, and increased transparency. Blockchain can offer a solution to the post-trade events processing to maintain a single source of truth together owned by all participants in the system. In simple words, the time period for securities settlement will be less profiting the market players.
Increased Fairness and Transparency
If executed, blockchain can act as an online automated surveillance system for each transaction. A blockchain-based exchange can have inbuilt characteristics to track, block and report illegal attempt made by anyone on the network, and can provide a robust platform to implement the security policy and standards. Since the blockchain ledger is designed in such a way that all participants have a complete record of transactions and, therefore, holdings of investors, it can bring in complete transparency and trust in the market.
Blockchain can reduce the inabilities through automation, which also leads to lower in cost and thus lowering entry barriers resulting in the growing market base. For people, who could not access the markets due to cost barriers will be able to participate, ultimately increasing liquidity and investment.
In simple words, in connecting blockchain with securities market, cash volume in the market will increase benefiting the public sectors investments.
Tool for Risk Containment
Through blockchain technology, margining practice and payment of margin can be done instantly and the frequency of valuation of securities deposited as capital can be done daily compared with the weekly process prevalent now, lessening the risk.
Lower Transaction Costs
Blockchain transactions are faster, as trade confirmations are done through smart contracts by peers instead of an intermediary. As the intermediaries in the system get minimized, costs linked, like trades record care, audits, and trade verifications also get eliminated or reduced.
The future for the stock market is fruitful as it is going to be more simple and viable for beginners as blockchain comes up. A revolution in the equity market is needed. One that removes the barriers to entry and the hurdles to investment. After effect, no more stock exchanges or trading through banks, brokers, and intermediaries. It’s going to be virtual trading in future. No more expensive fees and slow clearing processes.
Thus, promoting global innovation and reinventing the entire rules in trading shares from our site is a must, so that it is something that is accessible to all.