The Need for a Securities Specific Blockchain
In the ever-evolving world of financial services, the role of blockchain technology is quickly gaining traction. While blockchain technology has been around since 2008, when the first successful cryptocurrency was created, its potential for other applications is now being explored. One such use case is the development of a securities specific blockchain – a blockchain platform that can be used to facilitate the buying and selling of securities. To understand why a securities specific blockchain is needed, this article will examines the issues associated with traditional methods of trading securities, and will discuss the potential benefits a securities blockchain can offer.
The Limitations of Traditional Securities Trading
Traditionally, securities trading is facilitated through custodian banks, stockbrokers, clearing houses, and market makers. These services perform a variety of important functions such as:
• verifying the identity of buyers and sellers;
• ensuring that all parties are compliant with applicable laws;
• executing trades through broker-dealers;
• settling trades;
• providing trading platforms to buyers and sellers; and
• providing liquidity to the market.
In addition to the above services, custodian banks, stockbrokers, clearing houses, and market makers also need to incur significant transaction costs related to the manual processes involved in each trade. This means that there are often high costs associated with the buying and selling of securities, which can act as a roadblock to many individuals who wish to become investors. Furthermore, the nature of these services can sometimes lead to lengthy settlement times, which can cause friction amongst buyers and sellers.
The Benefits of A Securities Specific Blockchain
A securities specific blockchain can provide significant advantages over traditional methods of trading securities. By leveraging blockchain technology, a securities specific blockchain can offer:
• Increased speed and efficiency: By using a digital ledger, blockchain transactions can be completed much more quickly than traditional methods. In addition, the use of smart contracts can facilitate faster and more efficient settlement and execution of trades.
• Reduced Transaction Costs: By eliminating the manual processes associated with traditional methods of securities trading, a securities specific blockchain can greatly reduce transaction costs. This can make investing in securities more accessible to a broader range of individuals and institutions.
• Transparency and Traceability: By using a decentralized digital ledger, buyers and sellers can be sure that transaction details are accurate. In addition, the traceability of transactions on the blockchain leads to increased transparency, contributing to increased investor trust.
• Risk Mitigation: By providing the ability to accurately track and verify transactions, a securities specific blockchain can help to reduce the risk of fraud or theft.
A securities specific blockchain can offer many significant advantages compared to traditional methods of securities trading. By utilizing blockchain technology, it’s possible to reduce transaction costs, increase speed and efficiency, and increase transparency. These features can lead to increased trust amongst buyers and sellers, increased availability of securities to a wider range of investors, and improved risk mitigation measures. In an ever-evolving world, blockchain technology looks set to play an increasingly important role in the future of the securities markets.
