Technology has been the driving force behind progress and innovation in the finance industry, from the telephone to the internet, all of which made trading faster and easier. We now stand on the cusp of the next huge advance, driven by a new, groundbreaking technology such as blockchain.
You might know of blockchain because of cryptocurrencies, but its potential is much broader. Blockchain is beginning to fundamentally change the ways the traditional Forex market operates for traders. This guide will detail how blockchain technology is enabling faster, secure and more open forex trading for all in easy to understand terms.
What is Blockchain?
Let’s discard all those complicated technical terms for a moment. The best way to simply understand blockchain is to think of it as a unique, shared digital notebook.
Picture a notebook you make copies of and share with thousands of others.
- When there is a new transaction, it gets written down as a new line in the notebook.
- The new entry is updated on everyone’s notebook at the same time – so everyone has the exact same copy.
- The entries are locked in – once a line is written down, it is cryptographically sealed and nearly impossible to ever change or remove.
As a result, the digital notebook is super secure, transparent, and incredibly, incredibly fast. This is the basic idea behind the integration of forex and blockchain.
The Big Blockchain Benefits in Trading
So, why is the concept of a “digital notebook” so revolutionary in the Forex world? The benefits of blockchain technology in trading are enormous, and they solve some of the oldest challenges in finance.
- Super-Fast Transactions: A traditional international bank transfer can take days to process. In contrast, a transaction on the blockchain can settle in minutes, or even seconds.
- Top-Tier Security: Every transaction is locked in, and verified by the network, making it incredibly difficult for fraud to happen.
- Complete Transparency: While the users are anonymous, the transactions are public. This creates an entirely new level of trust and fairness in the marketplace.
- Lower Costs: Traditional finance has many “middlemen” all taking their cut. Blockchain can eliminate much of this, making transactions less expensive on the additional costs.
All of these amazing benefits of blockchain technology in trading are the reason for the excitement around the technology.
How is Blockchain Used in Forex Today?
The concept of blockchain in forex trading is not something that is just around the corner; it is already taking place in a number of ways.
- Faster Cross-Border Payments The first principle activity of the forex market is moving money from one country, or currency, to another. Blockchain is improving this process quickly and efficiently, and this is the most basic level of forex and blockchain where the two systems connect.
- The Crypto Forex Bridge This is a very clever idea. Let us say you want to swap US Dollars for Japanese Yen. You can do this with the old, slow banking system, or you can simply use a crypto forex bridge. It works like this: Your USD is converted instantly into a stable cryptocurrency; the crypto is sent across the world in a matter of seconds; it then converts to JPY on the other side. The process can be much faster and cheaper this way.
- The First Blockchain Forex Platforms We are now beginning to see the first “true” blockchain forex platforms being built. These are new types of trading venues that are built directly on the blockchain and are able to offer a level of transparency that has not yet been achieved in any other type of trading venue.
The Role of Modern Brokers in this New World
The realm of blockchain in foreign exchange trading is fascinating and leading brokers are jumping on this emerging technology. To provide a ticket to the markets however, you still require a solid broker that specializes in technology.
- If you are a trader looking for a simple and secure platform, brokers like Capitalix and SmartSTP are great options.
- This new technology requires a fast and reliable connection to the marketplace. Brokers like FX Road and Trade EU Global are known for their growth and strong infrastructure aimed at being ready for the future.
- Serious traders that are exploring these new frontiers, require professional tools however. Platforms from CapPlace as well as the ECN Broker FirstECN deliver professional tools into their platform designed for advanced traders hoping to navigate the markets as they evolve.
- Innovation is the focus of foreign exchange brokerage when integrating with blockchain technology. Brokers such as SuxxessFx, Tradgrip, and Algobi are all known for being on the cutting edge and are the type of companies that will continue to push new technology adoption into the markets.
Conclusion
The term “blockchain” in forex trading is more than just a cliche. It’s a fundamental shift in how the biggest market in the world functions. Blockchain technology is solving old problems with new and exciting solutions.
This technology is improving the trading environment for traders by making the market faster, cheaper, and more secure. It’s a great time to take part in this financial revolution.
FAQs
- What is blockchain in simple terms?
It is like a shared and super-secure digital notebook. When a transaction is recorded, it’s shared with everyone and cannot be changed, which makes it very trustworthy.
- What are the main blockchain benefits in trading?
The main benefits are much faster transaction speeds, enhanced security, greater transparency, and lower costs by removing middlemen.
- What is a crypto forex bridge?
It is a method of using a cryptocurrency (like a stablecoin) to quickly and cheaply swap between two traditional currencies, bypassing the slower, older banking system.
- Will blockchain replace traditional Forex trading?
It is more likely to improve it rather than replace it completely. The forex and blockchain integration will probably happen gradually, making the existing system much better.
- Do I need to understand blockchain to be a Forex trader?
No. While it’s good to know about blockchain in forex trading, you can still be a very successful trader using the excellent platforms provided by modern brokers.