This article is part of Morgan Capital’s content partnership with Warren Mak. Find more of his articles here.

Although the cryptocurrency market saw a major correction, its underlying technology – blockchain – is developing rapidly across various industries. The trendis inevitable.

As different industries increasingly adopting blockchain technology, it is also shaking up theresearch, analytics and prediction segments in the financial services sector.

The decentralized nature of blockchain technology is a major breakthrough. This technology eliminates the need for intermediaries and the trust in other people.

From a technical point of view, its immutability and traceability features can address the issues of scams, fraud, hacks and human errors.

The benefits of the decentralisation of transaction and production process:

● Enhance efficiency

● Keep the instructions and processes updated in real time

● Higher accuracy

● Reduce execution risk

● Higher quality output

● Lower production costs and expenditures

In short, blockchain will disrupt the financial services industry.

There’s a saying that goes: “Water can carry a boat, but it can also sink it.”

Blockchain will drive the growth of global financial technology market while eliminating the weaker players inthe financial industry.

How will the technology affect the capital market?

  1. Intermediaries and platforms in the stock market

If we use blockchain and smart contracts technology for stock trading, we can address some of the bottlenecks and risk issues in the industry, such as settlement process and risk management measure.

Technically speaking, we can speed up to T+0 settlement period for securities transactions by adopting the blockchain and smart contract. The benefit of T+0 settlement period is to reduce settlement funds and the risk of share transfers.

With the blockchain and smartcontracts technology, the buyer’s identity and the available funds in the CDSaccount can be verified in real time during the transaction.

Likewise, the seller’s identityand available securities in CDS account can also be verified.

Hence, when trading stocks, the system can transfer the securities from the seller into buyer’s CDS account in real time, while money will transfer from buyer to seller’s account.

In short, the technology willsignificantly reduce transaction failure, settlement time and cost.   

In fact, blockchain and smartcontracts have verified the buyer and seller’s information, as well as available funds and securities before proceeding to any transaction.

The real-time verification is toensure no last-minute changes will cause a transaction to fail.

This process and settlement system are similar to the Real Time Gross Settlement which was adopted by the bankingpayment system. It will facilitate the automated process and securityprotection more efficiently than the previous settlement system.

2. Stock trading and stock price prediction

Institutional funds and investors can also analyse data with the immutable transaction records to develop a better algorithm and they will get a more accurate stock price estimates and result.

Currently, blockchain technology is still at an early development stage and the financial sector also still exploring its potential applications to the industry.

The technology will create a more level playing field, and this will allow retail investors able to compete with investment funds that are usually dominating the stock market. This probably the best thing that retail investors will benefit from blockchain technology.

Blockchain technology will disrupt the global market

The technology will disrupt the retail and commercial financial services industry globally. So far, there are at least dozens of industries are affected by it.

If you can predict which listed companies will be the beneficiaries of blockchain technology, you might become the future winner with them.

However, for those companies that do not adopt or refuse to leverage on blockchain technology will lose their market share and position.

If you invest in these companies, you will lose your personal wealth.

This article is translated by Jeanie Chew. The original article is written by Warren Mak in Chinese and published in Nanyang Siang Pau. You can find the original article here.


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