Blockchain technology stocks have been hailed as a great potential to transform financial foundations. How does blockchain renew such financial services?

Undoubtedly, blockchain is defined as a subset of distributed ledger technology that integrates three simple concepts: smart contracts, cryptography, and distributed ledger. The ledger takes over keeping track of transactions among a public network in chronological order. The most notable point in this system is that it allows all network users (called nodes) to own an identical authority to authenticate the blocks in the chain.

Derived from Nakamoto's whitepaper "Bitcoin” many years ago, “A- Peer-to-Peer Electronic Cash System" provoked the applications of blockchain. However, blockchain has been considered a relatively new technology with limited adoption and inventive solutions for common problems. The stock market is the most effective application of blockchain technology in the finance sector. 

How does blockchain work to change stocks trade? 

Enhance the liquidity of stocks

Thanks to automation in smart contracts, Blockchain technology stocks enable to reduce the inefficiencies and intermediaries. Moreover, this mechanism also helps reduce cost and thus lowers entry barriers that lead to an increased market base. People, who were supposed not to have a chance to access the markets due to inappropriate costs will be able to engage in. As a result, the stock market is gradually increasing liquidity and investment.

Act like a risk-containment mechanism

Margin payment may be done instantaneously with blockchain technology stocks. The valuation of securities is implemented daily rather than weekly, which reduces the rate of risks. When a stock's contract is endorsed, it is encrypted by advanced cryptography and connected to previous records. Every transaction is documented and shown publicly. This data is recorded among several computers, effectively preventing hackers from stealing or adjusting. 

Reinforce the fairness and transparency 

Acting as an online automated system for transactions, blockchain enables an exchange to have built-in features to track, block, and report illegal attempts made by anyone on the network, as well as to implement security policies and standards. Because the blockchain ledger is constructed in such an open-source platform where all its users have a complete record of transactions. As a result, this mechanism brings fairness and transparency to the stock markets.

Lower each transaction in the stocks market

Blockchain technology stocks are traded faster because their verifications are implemented by peers utilizing smart contracts rather than an intermediary. The number of intermediaries like brokers or stock exchanges in the system decreases rapidly. Therefore,  costs or commissions associated with them, such as trade record keeping, audits, and trade verifications, drop off. In the blockchain platform, buyers purchase stocks directly. 

Challenges and opportunities of Blockchain technology stocks

Despite the greater transaction security and lower risk of manipulation, such new technology may also confront legal and regulatory difficulties. The financial industry ecosystem is now unsure whether blockchain, especially applied to capital markets, is able to deliver on its promises. Moreover, the hazards of scalability concerns, regulations, and security across a decentralized database are what all the companies with the adoption of blockchain technology stocks are facing.  

About akaChain

akaChain is backed by FPT Software, a globally leading technology, and IT services provider. It is an end-to-end, permissioned, multi-chain network based on the Hyperledger Fabric. Since its establishment in September 2018, akaChain’s product has assisted many enterprises, from SMEs to Fortune 500 firms, to transform with distributed ledger technology. The company provides a broad range of permissioned blockchain-based products and services in multiple sectors, including retail, supply chain, banking and finance, insurance, shopping mall management, etc. to transform with its distributed ledger technology. For more information, please visit https://blog.akachain.io/

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