• Carlos Lin

Application of Blockchain in Online Trading

Updated: Aug 6



You may have come across the word “blockchain” many times but what exactly is blockchain and what is its relevance in online trading?


Simply put, Blockchain is a database that stores a collection of information or data that is convenient for searching. Each block in the blockchain is assigned with a hash value, which is used for fast and convenient searching. The data are stored in blocks with certain capability.


Any transactions that happened will be stored in a block before adding to the central block of chains. When blocks are connected into blockchains, it is very difficult to change any data inside any blocks as chains between the blocks allow constant check of data in all blocks. Changing one block will be immediately apparent thus a successful hack an individual, it would require the hacker changing the data in every single block.

Due to blockchain’s advantage in storing information, many companies have adopted blockchain technology. Examples include:


HSBC uses blockchain technology in global trade which acts as a centralized system to ensure sellers will be paid, reducing HSBC’s processing time from 5-10 days to hours. It is also using blockchain in foreign exchange transaction for their thousands of clients.


BBVA is one of the world leaders in using blockchain and develop its potential in the financial market. Blockchain platform developed by BBVA allows all participants to have access to a transaction and reduces the time of issuing and negotiation. Also, the natural searchability of blockchain allows investors to quickly find investment product they are looking for very quickly through the platform.


Blockchain is popular in online trading due to 2 significant advantages:


Automation

All transactions are automatically stored in the blockchain, instead of a one-by-one basis traditionally, allowing for large amount of cost and time-saving. Also, this ensures the data stored is 100% accurate.


Decentralization

Traditionally, trading relied on trust between 2 parties, which made both parties insecure since there was an absence of a centralized system to control the trading process. However, with blockchain, the trading process is decentralized and there now exists a centralized system to control the trading process.


However, blockchain still faces some significant challenges in its integration.


Reputation

Blockchain is closely associated to cryptocurrency, which is an emerging form of currency which people are unfamiliar with. Furthermore, with the rising number of hacker attacks and fraud incidents, large companies may be cautious when approaching a new technology.


Lack of Scalability

Visa is able to process more than 2000 transaction per second while blockchain can only process around 10-20 transaction per second since it is designed to track transactions in a safe and secure environment. Therefore, as demand for blockchain technology increases, companies need to innovate and develop blockchain further to make it capable of tracking large scale transactions.


Integration in the Company

Integration of blockchain would require a complete restructure of a company’s database. Talent is required to setup the database, else companies have to rely on outsourcing this restructuring, which would cost large amounts of money and time.


Thank you for reading!