Uses of Blockchain In Financial Markets
A growing number of budding investors and traders have warmed to tokenization platforms and cryptocurrencies as an accessible asset class that they can invest in to cut their teeth on and get to grips with the core concepts involved in trading stocks, shares, and currencies. Cryptocurrencies are built upon blockchain networks. Each network works differently and with the tokenization platform the coins/tokens are generated according to different conditions. If those tokens can then be spent or redeemed, they will have a monetary value.
Thanks to online brokers like easyMarkets, trading cryptocurrencies via contracts for difference is fast and simple. The financial barriers to entry for CFDs are also lower than they are for other types of financial instruments.
The main drawback of cryptocurrencies as investment assets right now is the lack of regulation. This means that scams have proliferated and there is a real chance of being ripped off when investing in crypto. However, if you do your research and ensure you choose a regulated provider like the aforementioned broker, you’ll give yourself a solid foundation for success.
Blockchain is one of the most versatile pieces of new technology that the world has seen in some time. blockchain in financial markets given the many unique features of blockchain networks, they are ideally suited to integrating into financial markets.
Fraud Reduction And Security
Sooner or later, the money made from criminal enterprises needs to enter into the mainstream financial system. Banks have a legal obligation to monitor their customers’ accounts for any of the tell-tale signs of money laundering or other types of financial fraud.
There are a number of systems in place that are designed to flag any suspicious accounts, but these systems are imperfect. Fraudsters are still able to game the system in a number of ways. For example, they have no problem bouncing their ill-gotten gains around the financial system and between multiple accounts, so as to disguise its origins.
Financial institutions are tempting targets for hackers. If a hacker can breach the right system and gain full admin control, they can make up transactions, change people’s access to money, and generally enrich themselves. In such a scenario, the only defense that banks have is their automated fraud detection systems.
This is because banks use centralized databases. In other words, if you can access and change that central database, the change will be instantly applied. On the other hand, a decentralized solution like blockchain can only be updated via consensus. It is much more difficult to execute a fake transaction on a blockchain network.
Blockchains aren’t just preferable to regular databases because they are centralized. Another important selling point is its immutability. This means that once a block has been added to the network, it is practically impossible for someone to come along later and change it. Therefore, everyone who holds a stake in the blockchain network can trust it to be accurate. With a centralized database, stakeholders must trust whoever the custodian of the database is to maintain it accurately.
These are just a small number of the many potential uses that blockchain has in the future of financial markets. Smart contracts will also make blockchain networks a popular means of settling trades. We are only just starting to scratch the surface of what blockchain can do.