There are endless possibilities for the application of blockchain in many industries. Let’s cite just some of them: tracking frauds, the secure share of medical records, tracking intellectual property.
Since blockchain technology expanded beyond the cryptocurrency sector, we can witness its additional application in today’s financial services. It turns out that blockchain technology may be the most useful in the world of finance. And it includes the foreign exchange market.
What is Blockchain
Most blockchains are developed as a decentralized database. It functions as a distributed digital ledger—the blockchain ledgers record and store data in blocks, organizing them in chronological order. The emergence of blockchain has brought many benefits to many industries, providing enhanced security.
Advantages of Blockchain
Since blockchain data is stored in many devices on a distributed network of nodes, the system and data are incredibly resistant to technical failures and malicious attacks. Each node in the network is able to replicate and store a copy of the database.
After the confirmation of the block, the reverse process cannot take place. Once the data is saved to the blockchain, it is tough to delete or modify it. This makes blockchain the technology of choice for storing financial records or any other data requiring audit capability. Every change is continuously tracked and recorded in a distributed and public ledger.
For example, a company could use blockchain technology to prevent fraudulent behavior by its employees. In this hypothesis, the blockchain could provide a secure and stable record of all financial transactions carried out within the company. This would make it much more difficult for an employee to cover up suspicious transactions.
In most traditional payment systems, transactions do not depend only on the two parties, but also on an intermediary. When it comes to blockchain technology, the in-between party is no longer necessary as the network of distributed nodes verifies transactions through a process called mining.
The Influence Of Blockchain Network on The Forex
The blockchain can help the foreign exchange market in many different ways. We can implement this technology in banking systems and apply in everyday banking transactions as well as in investment markets such as stocks, foreign currency trading, etc. The blockchain technology has already been implemented in peer to peer trading networks in a partnership of tech providers and Vanguard Group, the mutual fund giant. With this sort of emerging option, it’s with considering how blockchain can improve the trading processes on the forex market. Here are some potential benefits that come up first to our mind.
The appeal of experimenting with the application of blockchain technology lies in its affordability. The lack of fees or lower fees is the main benefit for blockchain-based trading providers on Forex. It’s because the blockchain transactions themself don’t produce any cost and fees. Consequently, the blockchain can get the investment banks out of the scenery, which means cutting the fees. Also, advertisements for low fees and no-fee investment services are going to attract a larger number of first-time forex traders.
Blockchain will also bring quicker transactions because trades conducted will be faster than the traditional banking or broker transfer. This will also have an impact on the foreign exchange market. The crucial factors that impact the currency values usually involve sudden market change or specific announcement, and these require a quick reaction. Other factors that can affect forex traders, specifically such as earning reports, interest rates decisions, listings of economic conferences, produce an impact on currency price practically instantaneously. That requires quick trades that blockchain technology can enable.
In a broad sense, the transparency that a blockchain network is going to appeal to a lot of new forex traders. When it comes to this technology, it enables the transparent record of transaction changes that are preserved entirely in the blockchain ledger. With all activities recorded in the transparent blockchain ledger comes clarity regarding the transactions, and this is very appealing for the forex traders.