An Application of Blockchain in Stock Market

An Application of Blockchain in Stock Market

Rajit Nair (Jagran Lakecity University, India) and Amit Bhagat (Maulana Azad National Institute of Technology, India)
DOI: 10.4018/978-1-7998-0186-3.ch006

Abstract

Blockchain is one of the growing technologies used for financial management systems. Financial data must be kept secure otherwise it can create a huge loss. So, whenever security features or technologies are developed must keep financial security as a priority. Stock market management is another area of finance sector that works on two concepts, that is, minimize the risk and maximize the profit. In this chapter, the authors discuss how blockchain technology is used for stock market analysis. Mainly blockchain will help us to make optimal stock exchanges through automation and decentralization. Stock market across the globe is rapidly using blockchain technology for the market transaction. Some of the country is still preparing themselves to use the blockchain technology. This technology offers huge potential for tracing securities lending, margin financing, and surveillance of system risk.
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Introduction

Blockchain defines as a distributed immutable ledger that contains all the transaction which has been executed (Yaga, Mell, Roby, & Sccarfone, 2018). A block is considered as a current part of blockchain which consist of some or all the recent transaction records. Once this transaction gets completed it goes into blockchain as permanent database. New block is generated when previous blocks completed. Blocks are connected together in the form of chronological order. Some of the benefits of blockchain technology are as follows:

  • It is a public ledger system which records and validated each and every transaction that makes it more secure and reliable.

  • Miners are the one which is introduced in blockchain and they are used for auditing the transactions. This makes the transaction as immutable and prevention from unauthorized users.

  • Decentralization is another approach which makes blockchain more secure. Due to decentralization approach there is no single authority which controls the entire network.

  • There is no third party or central authority involved which allows us to perform peer to peer transaction.

Many of the banks and financial institutions are investing their money and time in this technology, because these sectors want to improve their services, so that they can provide safe and secure environments to the clients. Some of the famous banks and financial institutions which adopt blockchain are DBS (Sia, Soh, & Weill, 2016), Deutsche Bank (Ackermann & Trümper, 2012), NASDAQ (Irrera, 2016), EBA (Kasiewicz, 2019), SCB, Fidor Bank (Kobler, Bucherer, & Schlotmann, 2016), Standard Chartered (Batsaikhan, 2017), US Federal Reserve (Dennis, 2004) and many more. Blockchain is classified into two categories one is private and the other one is public blockchain.

Public Blockchain

In this blockchain anyone who is a participant of the platform can read or write to the platform by providing the proof of work for the same. Most of the activities are done through public blockchain and public blockchain is considered to be fully decentralized. Some of the used public blockchain technologies are as follows:

  • Ethereum: It’s a provider of decentralized platform and programming language that helps developers to build or publish smart distributed applications (Wood, 2018).

  • Factom: It is a provider of records management and business processes for government and business (Snow, Deery, Lu, Johnston, & Kirby, 2018).

  • Blockstream: Another provider of blockchain technology that enhances the capabilities of bitcoin. Accounting is also done with the help of this public blockchain technology (Allen, 2016).

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