The value of cryptocurrencies as well as their acceptance by governments and for business transactions is constantly in the news but conversations are gradually shifting away from the legitimacy and regulation of cryptocurrency to the underlying decentralised technology that powers crypto-trading – blockchain technology.
Blockchain is a virtual ledger that has the ability to record and verify a high volume of digital transactions. This technology basically eliminates third parties in a transaction process, reducing conventional cybersecurity risks, software errors and human errors. It is used for automated crypto-trading, offering a secured way to redeem investment through cryptocurrency tokens.
However, does blockchain technology deserve a place in the stock market?
In the same way that many industries have utilised disruptive technologies to automate their processes, lower operating costs, boost output and be more competitive, blockchain technology can be applied to automate trading in the stock market.
Absa Bank, a leading pan-African Corporate and Investment Bank, in February this year, announced that it has joined the Hyperledger Foundation, an open, global ecosystem for enterprise blockchain technologies, which offers open-source distributed ledger frameworks, libraries and tools that organisations can leverage to develop applications, digital platforms or hardware systems.
The alliance of Absa with other financial institutions will enable it to develop solutions backed by blockchain technology that will address common financial transaction issues.
The bank is investing in decentralised ledger infrastructure and looking beyond using the technology to trade in digital currencies to exploring new use cases with the ultimate goal of meeting evolving customer needs.
For years, companies have explored different ways to improve the efficiency of transactions in the stock market. Exchanges now complement human capacity with artificial intelligence and data analysis, which helps brokers to assess risks, gain market insights and simplify market operations as much as possible.
On the other hand, blockchain can be used to automate the trading of stocks, offering an easier and faster way to transact stocks online in a secure way.
Blockchain ledger, according to an analysis by research firm, CB Insights, is capable of reducing trade settlement times and costs, while ensuring transparency in the transactions. It also powers a system that ensures post-trade clearing and reconciliation are conveniently done.
Insights published by SkyQuest Technologies estimated that investment in blockchain technology will rise from $ 4,771.34 million in 2021 to $77,778.9 million in 2027 at 64% CAGR due to increased venture capital funding in blockchain technology; extensive use in banking and cybersecurity; payment, smart contracts and digital identities.
Just like Absa, many other financial institutions and start-ups that are already gearing up to explore the various applications of blockchain should speed up their investment in this disruptive technology, which is expected to transform the capital markets ecosystem.