“There are 3 eras of currency: commodity based, politically based, and now, math based.” – Chris Dixon
Blockchain technology was initially introduced in 2008 by Satoshi Nakamoto, an anonymous group name used to represent an individual or an organization – the real identity still is a mystery. Originally, the mission was to create an accounting method for Bitcoin, a digital currency that was launched in 2009. However, almost after a decade of its introduction, the currency is immensely popular as a digital asset and blockchain technology has continued to excel. Today blockchain technology is used in various sectors and is rapidly disrupting industries like healthcare, shipping, energy, etc.
The basic idea behind blockchain technology is to create a platform where each information exchange is unique and untraceable. Blockchain technology is a decentralized platform and allows the parties involved to establish any kind of agreement without involving any third party. The parties need a smart contract – a set of rules that will help both sides exchange money or other values in a transparent and secure way.
The technology has been very useful in the financial industry because of the fact that smart contracts are self-executing and self-verifying transactions, contributing to trading activities.
The first application of blockchain technology in trading was in May of 2015, when Linq, a blockchain-based private trading platform was launched. The platform would allow all the private companies to represent their share ownership digitally, even if they are not listed on the stock exchange. This system managed to successfully complete and store a private-securities transaction to a private investor. Since then, blockchain technology has featured several other projects that have teamed up with some of the leading banks to develop new payment solutions and mutual fund trading platforms.
In a blockchain network every transaction is registered and the possibility of changing or deleting any data is eliminated. It is impossible to manipulate data on the decentralized system. Also, blockchain technology not only makes trading in stocks easier, but also speeds up the processes, increases the traceability of their provenance and facilitates the availability of the records. The technology is beneficial to the brokers because it provides ample time between an order and the actual exchange. The risks related to trading are highly restricted.
Blockchain technology has the ability to detect any unusual movements and warns the parties of fraudulent behavior.
Big banks often charge their customers with unnecessary fees. Blockchain technology can help reduce a trader’s reliance on brokers. The dominance of big banks can be put to an end. Also, the cost of trading can be vastly reduced. The days seem long gone, when human emotions would cloud trade, and inaccurate data could potentially ruin an entire network. The future holds immense opportunities for traders and financial advisors in this era of super intelligent computers.
The new digitized system is going to help reduce a lot of paperwork. The party which automates the process, prevents cons, democratize the trading activity and reduce inefficiencies will hold ultimate control.