Impact of Blockchain Technology on the Stock Market

Impact of Blockchain Technology on the Stock Market

C. V. Suresh Babu, Sanjai Das
Copyright: © 2023 |Pages: 16
DOI: 10.4018/978-1-6684-8624-5.ch004
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Abstract

Several of the inefficiencies and risks that afflict traditional stock market infrastructure have been addressed by blockchain technology. Blockchain, due to its decentralized and transparent nature, can provide a safe and efficient platform for investors and issuers to exchange assets without the need for middlemen. This chapter investigates the influence of blockchain technology on the stock market, examining the possible benefits and hazards connected with its implementation. The authors contend that blockchain has the potential to transform the stock market by lowering transaction costs, increasing liquidity, and improving transparency. Nevertheless, there are problems and hazards connected with integrating blockchain technology into the stock market, including regulatory and legal hurdles, interoperability concerns, and the possibility of market disruption. As blockchain technology evolves, market players must carefully assess the consequences of its adoption and work together toward its ethical and sustainable integration.
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Problem Identified

The present stock market infrastructure is built on a centralized system with several intermediaries, such as brokers, custodians, and clearinghouses. With high transaction fees, extended settlement timeframes, and a lack of transparency, this system is complicated and costly. It also carries considerable dangers, including counterparty risk and the possibility of fraudulent activity.

Blockchain technology has emerged as a viable replacement for existing stock market infrastructure in recent years. Blockchain is a distributed ledger system that enables safe, transparent, and immutable transaction record-keeping. It ensures the integrity and secrecy of data using cryptographic techniques, and it eliminates the need for middlemen by offering a decentralized and trustless system.

Numerous Blockchain-based efforts have been undertaken to disrupt the stock market. For example, tZero, a Blockchain-based trading platform, intends to cut settlement time, boost transparency, and lower transaction costs. Similarly, NASDAQ has introduced Linq, a Blockchain-based platform that allows private firms to issue and exchange shares on a Blockchain-based platform.

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