In the blockchain, information moves between several nodes as it departs from the sender of the information to the recipient. Each node only knows where the information came from and where it is going, making all transactions complete secure, untraceable and private. Every time information goes from one node to the next, the proof of concept algorithm must be executed, thus ensuring the integrity of the information travelling on the blockchain. This process is what assures the validity of each transaction.
Being a decentralized system, blockchain allows the parties involved to establish any kind of agreement without the necessity of any middleman, including lawyers, public accountants, notaries, government institutions, civil servants or any other party needed to attest to the information’s integrity. All that is needed is a smart contract: a set of codes that will help both sides exchange money or other values in a transparent, secure and trustable way (as described above, where the information goes from node to node using the proof of concept to validate the flow). As the intermediaries’ oversight and intervention get minimized, the costs related to them also reduce, and in some cases they even get eliminated.
Prableen Bajpai, founder and managing partner of FinFix Research and Analytics, wrote for Nasdaq, in June 2017, that “the functioning of stock exchanges involves complex procedures that can be time consuming, cost inefficient, cumbersome, and prone to risks”. For this reason, this environment offers blockchain the opportunity to prove “its potential ability to streamline the process” and a lot of money and resources are being invested to see how this technology can be leveraged in this sense, especially by Nasdaq and the US stock exchange itself.
The blockchain functions through a viable bookkeeping system and can register every transaction, denying the possibility of changing and deleting any of them. Once the parties involved agree on the validity of a specific movement, this “block” of operations is secured in the system and cannot be removed. This guarantees that the data will not be manipulated or modified by any means; it will just be impossible to duplicate, erase or fake information, as they will be recorded in a permanent way.
Blockchain data is accurate, timely, complete, consistent and easily accessible. Essentially, the blockchain technology greatly simplifies not only the trading in stocks, but also in other securities, by speeding up the processes, increasing the traceability of their provenance and facilitating the availability of the records. The technology has the potential to offer brokers a solution for reducing significantly the amount of time that occurs between when an investor’s order is placed and when money and securities are actually exchanged. Not to mention that the risks related to trading will be greatly minimized.
The blockchain technology is able to track and monitor in real time any movement and operati...