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The value of cryptocurrencies and their acceptance by governments and for commercial transactions are constantly in the news, but the conversations are gradually moving away from the legitimacy and regulation of cryptocurrency towards the underlying decentralized technology. which 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 essentially eliminates third parties in a transaction process, reducing conventional cybersecurity risks, software errors, and human errors. It is used for automated crypto-trading, providing a secure way to redeem investment via cryptocurrency tokens.
However, does blockchain technology deserve a place on the stock market?
In the same way that many industries have used disruptive technologies to automate their processes, reduce operating costs, increase production, and be more competitive, blockchain technology can be applied to automate trading in the stock market.
Absa Bank, a leading pan-African business and investment bank, announced in February this year that it had joined the Hyperledger Foundation, an open, global ecosystem for enterprise blockchain technologies, which offers open source distributed ledger frameworks, libraries, and tools that organizations can leverage to develop applications, digital platforms, or hardware systems.
Absa’s alliance with other financial institutions will enable it to develop solutions backed by blockchain technology that will address common problems in financial transactions.
The bank is investing in decentralized ledger infrastructure and looking beyond using technology to exchange digital currencies to explore new use cases with the ultimate goal of meeting changing customer needs.
For years, companies have explored different ways to improve the efficiency of stock exchange transactions. Exchanges now complement human capabilities with artificial intelligence and data analytics, which help brokers assess risk, better understand the market, and simplify market operations as much as possible.
On the other hand, blockchain can be used to automate stock trading, providing an easier and faster way to trade stocks securely online.
According to an analysis by a research firm, CB Insights, the blockchain ledger is capable of reducing transaction settlement times and costs, while ensuring transaction transparency. It also powers a system that ensures that post-trade clearing and reconciliation is done conveniently.
Information published by SkyQuest Technologies estimated that investments in blockchain technology will grow from $4,771.34 million in 2021 to $77,778.9 million in 2027 at a CAGR of 64% due to increased funding by venture capital in blockchain technology; heavy use in banking and cybersecurity; payment, smart contracts and digital identities.
Like Absa, many other financial institutions and start-ups that are already gearing up to explore the various applications of blockchain are expected to accelerate their investments in this disruptive technology, which is expected to transform the capital markets ecosystem.