How Is Blockchain Impacting Forex Trading?
How Is Blockchain Impacting Forex Trading?
In the early days, trading was done by exchanging materials for other tangible things. Based on some data forex trading started with Babylonians. Later, with the metal age beginning, silver and gold were used as tools for transactions. It is precisely this time when the idea of trading became more popular. But when the coin was discovered the whole game changed.
Furthermore, the modern currency exchange began in 1971 when the Bretton Woods Agreement was reached. Throughout history, many people have been curious and have shown interest in how trading works and what it actually is.
Nowadays trading forex is a “cool” thing I would say somehow. The internet has been e pivotal change to trading forex as well, allowing many youngsters to learn how to trade and show their trading skills. Furthermore, things got interesting when Satoshi Nakamoto released Bitcoin in 2009 and the cryptocurrency era began. Well, now let’s see what happened next…
Is blockchain disrupting the forex market?
Currently, the forex market information such as global supply and demand for currency information is controlled by central banks. Banks, corporations, traders, governments and investment funds have the main impact on the forex industry.
On the other hand, blockchain is just growing and experts predict that by 2021 the blockchain technology market will grow to $2.3 billion. Blockchain is being used widely in many other industries so forex trading was not going to escape. Blockchain has proved itself as a great system where all payments and purchases using cryptocurrencies are made. And it has its credits for the same reasons when it comes to the forex trading arena.
All the brokers that decided to use blockchain as a tool for their transactions did it because of its benefits. It is obvious! The only way blockchain could disrupt the forex market is by having a positive impact.
What are some of the benefits of using blockchain on forex trading?
This is a question that is being asked by businesses and bankers worldwide. Well, blockchain is a technology-based solution, therefore just like all technology-based solutions blockchain will be beneficial only if it solves real problems and provides better infrastructure by removing obstacles in the trading industry. Now, is blockchain doing that? What benefits is it providing?
1. Decentralization is one of the most important factors of blockchain. Therefore, by using blockchain, the forex industry can decentralize record keeping. This makes the peer to peer exchange possible rather than going through central banks.
2. Transaction speed is another key aspect where blockchain helps. For years banks have been trying to cut down costs related to foreign exchange transactions. The same benefit they can pass on to their customers. According to the World Bank reduction in the cost of cross-border payments could save up to $16 billion a year.
3. Transparency is another element where blockchain helps. Central Banks determine and maintain the price keeping out small corporations and retail traders, giving them no control at all over how currency prices are determined and maintained. With blockchain, all partakers have access to price information.
Will there be more security using blockchain?
Security is one of the most important aspects of any business. Especially financial companies where people pour their money in, trying to make profits. Living in this fast-paced, global economy that relies on data carried through cyberspace has made security even more challenging. You might be trying to protect your business but hackers are out there constantly looking for chinks in the defenses you put up as assurance.
Blockchain increases security because it encodes its data in a way that makes cybercrime impossible. Blocks have unique hash numbers and each block is linked to the previous one. This is the key factor that makes the whole system into amazingly difficult, not to say impossible to manipulate. It is very necessary to have such high-security levels considering that forex is an incredibly liquid market. But, the forex market is also vulnerable to cybercrime and to the possibility of trading accounts being easily manipulated. From this point of view, it seems like blockchain could be the right tool to increase security.
The takeaway
The financial industry is being revolutionized by the creation of trusted interactions between corporations, service providers, B2B networks and financial institutions. Blockchain is a new highly efficient model. Obviously, these new highly efficient models are way better connected. Also, they are more open infrastructure and highly automated, which demonstrates the benefits of blockchain in trade finance.