What began as a ledger for Bitcoin transactions more than ten years ago, has turned out to have so many applications. It is undeniable that blockchain technology is influencing every sphere of our lives today.
It’s immutable, and decentralized features make it attractive to many sectors. Apparently, blockchain is one of the most revolutionary inventions of the 21st century. Although Bitcoin (BTC) has many critics who raise valid points, that does not seem to be the case with the technology behind it.
The financial sector is experiencing significant changes at the moment. And because visionaries, innovators, and governments have learned to differentiate the technology from cryptocurrency, we might be on the brink of a new revolution.
What does blockchain bring to the stock market?
Blockchain can offer solutions to compatibility, trust, and transparency problems in the current fragmented market systems. Stock market participants like traders, brokers, regulators, and stock exchanges are often required to go through a cumbersome process (which takes more than three days to finalize transactions, majorly because of intermediaries, operational trade clearance, and regulatory processes).
Blockchain can make stock exchanges much more optimal via automation and decentralization. It can help minimize the huge fees imposed on customers in terms of commission while accelerating the process for quick transaction settlements.
The technology can have practical use in clearing and settlement, while securely automating the post-trade process, easing paperwork of trade and legal ownership transfer of the security. Besides, blockchain can remove the need for intermediaries to a great extent, since the terms and conditions would be coded in smart contracts and implemented in every trade automatically.
Automation of post-trade events
Using blockchain and smart contracts in post-trade activities can eradicate the need for third parties, minimize counter-parties, and operational risk while providing the infrastructure for faster trade settlements.
Financial institutions can settle securities quickly instead of days, with the main benefits being streamlined real-time settlements, improved liquidity, supply chain optimization, and better transparency. Blockchain can provide solutions to the post-trade activities by acting as a single source of truth accessed by all participants in the network.
Increased fairness and transparency
If embraced, blockchain can act as an online automated surveillance system for every transaction. A blockchain-based exchange, like Tokenizer, can have inbuilt features to track, block, and report illegal attempts made by anyone on the network, and can provide a reliable platform to perform the security policy and standards.
The primary benefit of blockchain is the elimination of third parties. In essence, since every blockchain transaction is confirmed by the community based on a mathematical probability, the need for a trusted third party is unnecessary. Blockchain would allow you to have a decentralized stock exchange, without the need for a brokerage, a clearinghouse, or settlement process.
Blockchain can reduce stock ineffectiveness through automation, which also leads to a decrease in cost and thus lowering entry barriers resulting in an increased market base. Investors who previously could not access the markets because of cost barriers will be able to take part, ultimately improving liquidity and investment.
Lower transaction costs
Blockchain transactions are faster since trade confirmations are executed through smart contracts by peers instead of third parties. As the intermediaries in the system are reduced, costs associated with them, such as trade record keeping, audits, and trade verification, also get eliminated or reduced.
Mechanism for risk containment
Through blockchain technology, the margin system and payment of margin can be made instantly, and the frequency of valuation of securities deposited as capital can be performed daily compared to the weekly process common now, minimizing risk.
Tokenizer is a blockchain investment banking platform for fundraising, investing, and trading Asset-Backed tokens (ABTs). You can convert assets like stocks to Asset-Backed tokens enabling more productive and more accessible fundraising, investing, and trading.
You can also fundraise from one of the biggest pool of investors globally through our platform. Finally, you can trade assets on the most significant global market for asset-backed tokens. Join our platform today and be part of the impending blockchain revolution in the worldwide stock market.