Blockchain technology is based on a distributed ledger technology and has the potential to revolutionize the financial sector and investment processes. Cryptocurrencies, Bitcoin being one example, are simply a practical example of Blockchain technology. Blockchain technology finds its use not only in the financial sector but in other industries as well. The technology is being adopted in supply chain management where stores like Walmart are using blockchain to track food products to tamp down contamination therefore many software development companies are now working on blockchain projects.
The future is blockchain.
Here are some ways this technology can shape the future of investing:
The current methods and processes applied in the world of trading are really cumbersome. The number of intermediaries involved in a normal financial transaction stretches the process to usually three days. Distributed ledger technology allows automated and instantaneous settlements and trades by eventually removing any third party intermediaries between parties. This reduces the post-trade settlement time from days to mere minutes.
Reduced Trading Costs
Trading cost of a particular process is directly proportional to the number of intermediaries involved in that process. Fewer intermediaries means fewer parties needed to be compensated during the trading process which will eventually reduce the cost of that particular trading process. Blockchain technology can give us a more affordable, faster and lower-cost banking system.
24/7 Global Trading
Distributed ledger technology can allow trading businesses and exchanges to operate 24/7, 7 days a week without interruptions. Say goodbye to after-hours trading woes and geographic boundaries. Huge exchange companies like Nasdaq are already heading towards that direction where they have partnered with ABN AMRO Clearing, EuroCCP, and Euroclear to make after-hours margin calls easier to cover.
Distributed ledger systems of all sorts allow all parties involved to view the full record of transactions. Every new trade done adds as a block to the blockchain and tracking them would become as easy as doing a little search on your smart device. Parties involved in a blockchain can also sign smart contracts to regulate each trade and block any illegitimate activity automatically.
Encrypted data and high security of a blockchain lead to heightened transparency and trust which eventually trickles through to investors’ relationships with their portfolio and investment managers. Blockchain technology allows trades and account transactions and any other secured data to be shared easily among the parties involved or even any other third party (with due permission). Likewise, the transfer of assets between institutions could become nearly instantaneous.