Nasdaq was the first fully electronic stock exchange, launching in 1971. Other exchanges still required traders to turn in slips of paper, which wouldn’t only be a hassle, but also inefficient with a lot of room for error.
Fast-forward 44 years, and Nasdaq is looking at becoming the first stock exchange to use the block chain, the decentralized ledger at the heart of Bitcoin and most, if not all, cryptocurrencies.
Last month, Nasdaq announced it had partnered with Chain, a block chain services provider, to facilitate the efficient issuance and transfer of shares in privately-held companies. A somewhat smaller part of their core business, the decision could act as a test bed for later integrations. Adding to this estimation, Nasdaq CEO Bob Greifeld told analysts in conference call today that the company will be looking at further uses of the technology.
We also plan to announce further block chain initiatives in the future. The application of block chain technology within Nasdaq’s private market aims to modernize, streamline and really secure cumbersome administrative functions.
In a phone interview with Bloomberg, Greifeld reportedly said that the technology “cannot be ignored” because its benefits are “immense.”
With a very basic understanding of what the block chain is, it is not hard to see how it could revolutionize such industries as stock trading. Transparency in a way that doesn’t compromise privacy can help alleviate the problems that more opaque solutions have created in the past. Namely, the credit default swapping and “toxic asset” offloading seen during the run-up to the 2008 financial meltdown would have difficulty repeating itself.