We live in an era of digital currencies and blockchain technology. If you’ve been paying attention to what’s going on in the digital world, you had to hear about blockchain. Its popularity is rising and it was only a matter of time when it will expand to the stock market.
Not only did blockchain start affecting stock trading, but it has the potential to revolutionize the way people trade with stocks. In case you’re wondering what kind of change this tech brings to the global stock trading, make sure you read on.
Introducing blockchain technology
People often associate blockchain with digital currencies such as Bitcoin. This doesn’t come as a surprise since it’s the technology behind them. However, there’s more to blockchain than that.
As the name suggests, blockchain consists of multiple blocks strung together. Whenever someone makes a transaction, a new block is added. When this happens, the new block becomes available for everyone to see. This is exactly what individuals and organizations were hoping for, as it makes their financial endeavours safer. Also, the blockchain cuts off any middlemen and makes transactions go through faster.
This technology accounts for the issues of security in multiple ways. Most importantly, the fact that blocks are stored linearly means that no one can alter their contents. If a hacker was to change the content of a single block, they would also have to change every other block in the blockchain.
Increased transparency
Some of the biggest issues with today’s stock market are the lack of transparency and trust issues. The problem is that there are middlemen and regulatory processes that cannot be avoided. This is why traders have always been looking for a system that makes trading with stocks easier. Enter blockchain.
Blockchain is an automated system that makes it possible for all trades to fall under a single surveillance system. Not only this, but that system can automatically detect any suspicious activities and deal with them.
Most importantly, this technology can provide anyone who takes part in the market with more transparency. You can access the full record of transactions using your PC. In addition, you can connect your PC to the blockchain network. That way, you receive an update whenever a new transaction takes place. More trust can have a huge impact on the market as we’ll see more new traders show up.
This tech empowered digital currencies
We already talked about blockchain and digital currencies earlier. However, it cannot be stressed enough how important this tech is for cryptocurrencies. This is especially important for stock traders, as blockchain might end up having the same effect on the stock market.
When digital currencies first became a thing, people wanted to use them without any waiting period. Moreover, they wanted more liquidity, which is exactly what they got with blockchain. As a result, more people started trading with crypto. Right now, trading with these assets is a great idea. For example, you can learn how to buy Ripple and start trading with it in no time. Experts at AskTraders provide information anyone who uses crypto can find useful.
It’s safe to say blockchain will impact stock trading in a similar way it changed digital currencies. More traders will feel comfortable making transactions. In addition, their liquidity will improve, allowing them to make even more trades.
Blockchain and smart contracts
We live in the age of smart devices. Next on the list are smart contracts. The emergence of blockchain has made it possible for traders to use this type of contracts. Smart contracts or self-executing contracts are particularly useful in post-trade events. These do more than just define the rules and penalties around an agreement. They also execute those rules and penalties automatically.
By using smart contracts, traders no longer have to wait for the other party to fulfil their side of the agreement. Everything happens automatically, changing the way stock trading looked in the past. There’s no more need to go to a lawyer or notary and pay them. This reduces operational risk and makes trades go through even faster. In addition, smart contracts help traders save money and improve liquidity.
When it comes to post-trade events, blockchain technology acts as a single source of truth for everyone.
The bottom line
There’s no doubt blockchain technology has already changed the digital world a lot. It helped digital currencies boom, and it looks like it’ll do the same for the stock market.
Increased transparency, lower costs, and more liquidity is exactly what traders were hoping to see. As a result, they’ll be more active than ever before. This is also the perfect opportunity for new traders to enter the market.
Blockchain is still in its infancy and we can only wonder what new changes this tech will bring into our lives in the next few decades.