Is Blockchain Altering The Way The Stock Exchange Is Working?
Is Blockchain Altering The Way The Stock Exchange Is Working?: Technology has the ability to enable stock markets to operate faster and be more complex than ever. Innovatively evolving at all times, technology has increasingly invaded more and more facets of life as we know it. The comfort it offers has also allowed it to become an integral part of life.
Background: How did it all begin?
Going back to the beginning of the stock market tells us it began with the Dutch East India Company in 1602, which became the world’s first publicly traded company.
Investors began to take interest and thus a secondary market for its securities began to flourish. People showed interest and began buying and selling stock in huge quantities. As a record had to be kept of course, a registrar tracked the transfer of shares between parties. While modern technologies such as blockchain technology of trade have sped up transactions so that they can now be executed almost instantly, the backbone remains the same.
The concept of blockchain explained:
The stock market operates on the old model with new technology. This simply means that while the speed of transactions has seen a vast improvement, the actual working is still the very same since it all began. When shares are bought or sold, stock transfer agents are the registrars who then track share ownership for issuers on the stock market.
Evaluations reveal that there are some problems with the old model such as:
- Depositories as well as transfer agents could be a possible point of failure
- Additional fee such as those incurred due to registration, transfer, distribution
- Widely held records, and thus higher administrative costs
Blockchain technology of trade suggests that technology can not only speed up the process, but can also change and upgrade the very basics and foundations of the entire system. How would it do this? Blockchain can be used to directly transfer share ownership between investors, instead of putting all transactions through a centralized hub. This method would be cheaper, with faster results with the added advantage of being more secure and being fully transparent.
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