The blockchain & financial markets: a big opportunity?

What opportunities does the use of blockchain technology offer the financial industry? One thing is clear: For the end user, modern technology offers greater security and individuality. Here we show what blockchain means for the future of the financial markets.


The financial markets are buzzing with activity, and this is especially true on the stock exchange. Due to the low interest rate policy, investors are looking around for opportunities to generate returns. In the meantime, there is no way around the stock market in this search.


A stock trading app offers many possibilities, because it has never been so easy and convenient to keep an eye on your stocks. But cryptocurrencies, especially Bitcoin, are also making news almost daily.


Whether shares, securities or cryptocurrencies, they all have one thing in common: they offer the prospect of returns that are simply no longer achievable through conventional savings methods.

The blockchain makes cryptocurrencies so special

Blockchain technology owes its enormous level of awareness primarily to trading in cryptocurrencies. This technology enables bitcoin, for example, to travel securely from the sender to the recipient.


Unlike traditional centralized networks, blockchain as a decentralized network offers a whole range of particularly important solutions. Therefore, the blockchain could be responsible for making some companies redundant in the future.


In many respects, this applies to the financial sector, but also to online commerce. Here in particular, blockchain technology could provide a great deal of progress.

What is the benefit of blockchain?

To understand the benefits of the blockchain, you first need to know what the blockchain is in the first place and how it works. The easiest way to do this is to take a quick look at how messages are traditionally sent.


A typical WhatsApp message does not land directly with the recipient, but first finds its way to the operator’s server. There, the message is stored and processed. Only then is the message sent to the recipient.


Unfortunately, the risk of data manipulation also increases with the usual storage with the operator. This is the main shortcoming of all central networks, because data is made available here that can then be processed, stopped or otherwise manipulated accordingly.


Unfortunately, this also applies to the conventional financial system, because banks are also affected by this. A transfer never reaches the recipient directly, but first goes to the responsible institution, i.e. the bank.


Ultimately, the bank then takes care of the actual transfer to the respective recipient. The risk here, however, and this has already happened frequently, is that the bank simply stops a transfer. This is the main problem with all central networks. The data, or transfers, can be arbitrarily diverted.


There are simply no guarantees that highly sensitive data will not fall victim to misuse. The question of how trustworthy and secure these systems really are has long been up for debate. Unfortunately, it is also impossible to ensure that only authorized persons have access to the data.


For precisely these reasons, people have long been on the lookout for new, better and, above all, innovative solutions. The blockchain is precisely this innovative solution.

Blockchain, the path to direct transmission

In terms of independence and security, the blockchain is a perfect solution. In all decentralized networks, the messages end up on many computers that are completely independent of each other, belong to completely normal users and are distributed across the entire world.


Since each PC only does a certain part of the work, the worry that any user could now read the message is completely unfounded. None of the members of this network can access or read the entire message.

The independence and security of each user is guaranteed with the blockchain. Source: unsplash / Austin Distel

This means that whether it’s a message or a bank transfer, both are sent from the sender to the recipient in an absolutely secure way. Decentralized networks thus offer unprecedented solutions to typical security problems.

What does blockchain mean for the future of finance?

Traditional credit and financial institutions are now challenged to think about improvements and innovations. In other words, they are coming under increasing pressure to optimize. For this reason, work is being done on blockchain technology in the financial sector in particular. The aim is to enable payment providers, for example, to use the blockchain to secure transactions.


Something similar applies to smart contracts. Here, blockchain technology is to be used for smart contracts. This is accompanied by enormous changes, as the central management of organizations would be governed by automated processes.

Blockchain technology and the benefits for the consumer

Back to the financial system: It is not a hypothetical assumption that bank transfers can simply be stopped and actually are. Those who remember Wikileaks will also remember how many donation accounts were suddenly simply frozen.


Even then, Wikileaks asked that future donations be made in the form of Bitcoins. The reason was that the cryptocurrency was transferred using blockchain technology. As already mentioned, there is no possibility here for financial systems or governments to have any influence on the transfer process.


Thus, for the future of financial systems, blockchain means an excellent opportunity for innovation. Security and secrecy, or better, truly secure handling of sensitive data is guaranteed here. The great advantage of blockchain technology lies above all in the fact that entire processes can be automated.

Source coverimage: Unsplash / NASA