Blockchain technology has gradually found its way into the forex market to become the new means for authenticating and verifying transactions. Many brokers have begun experimenting with the use of Blockchain in executing transactions and rendering services to their clients while others are still hostile towards bringing the Blockchain technology into forex as it will likely drive a lot of online brokers out of business. This is because with the Blockchain technology, forex traders can simply buy and sell various financial instruments once the transactions have been approved on the Blockchain without needing a broker.
Blockchain technology has many innovations and benefits to offer to traders today. Many believe that it will reshape the forex market making it more secure and reliable for carrying out transactions. This work has therefore examined the various ways in which Blockchain technology will impact the forex market once fully integrated.
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What is blockchain?
Blockchain is a decentralized data-based technology that connects public users using nodes. It collects public data and stores them on a series of chains making up the blockchain which makes it difficult to manipulate or change the data stored on the blockchain.
With the blocks being connected to many users at the same time, it makes it possible to transmit data at a high speed to all the users. Hence, blockchain is reputed to be one of the fastest means for data transmission as well as the most secure means of storing data to avoid manipulations.
How is Blockchain impacting the Forex Market today?
The use of Blockchain has not been fully integrated into forex today. Only a few forex brokers had attempted to use the Blockchain technology in rendering services to their clients today. The use of Blockchain so far has positively impacted the quality of services rendered by these brokers such as: increased execution speed and low cost of carrying out transactions.
Blockchain technology has more benefits to offer to forex traders rather than brokers. Thus, adopting Blockchain technology in Forex trading today will cut off the need for brokers or any other intermediaries for trading. Thereby, reducing the charges traders have to pay to brokers for trading; in the form of spreads and commissions. This is no doubt why many brokers are not eager to promote the wide-scale adoption of blockchain technology in the forex industry today.
Advantages of adopting the Blockchain technology in Forex trading today
- Strong transparency: One major advantage of using blockchain technology is its transparent nature for carrying out transactions. All transactions carried out using the blockchain are open for verification to all the users through the hashcode and cannot be altered without a consensus of the users.
- Very fast in carrying out transactions: All transactions carried out using the Blockchain are completed almost in a second. This is because the blocks are connected using a node making it easy to pass the same information to all users at the same time.
- Greater security: Blockchain technology is more secure for carrying out transactions than other systems existing today. The Blockchain is secured using secret encryptions that are difficult to decode or hack.
- Low transaction cost: The cost of carrying out transactions using the Blockchain is very cheap compared to what is obtainable as brokers’ commissions for trading today.
Disadvantages of adopting Blockchain technology in Forex trading today.
- Gives room for crime: The decentralized nature of Blockchain gives people the course to commit crimes such as theft, hacking, money laundering, etc.
- Consumes a lot of energy: Blockchain technologies require a lot of electricity to function and are not environmentally friendly.
