Blockchain technology has been used in stock markets in the past, but the way it’s utilize may be the wrong approach. Professor David Yermack put forward an argument at the Imperial College London’s FinTech-focused conference about the use of this innovative technology.

His Argument

Yermack made his presentation by arguing blockchains would operate differently than capital markets. Certain functions like stock settlements would occur on public blockchains like bitcoin instead of private alternatives.
Yermack explores the broader vision of using blockchain technology in finance and what it means for the industry. He even takes a critical stance on exploring the tech and how it could change the finance playing field.

Change Could be Underway

Yermack did acknowledge public blockchains does have its limitations and didn’t shy away from touching on the subject. Bitcoin is limited in providing a proof of work system, but Yermack firmly believes the industry could work out the kinks in this system. He insisted finances for the future would be changed drastically by using decentralized blockchains. This prevents monopolies from taking places that guard against currencies, bonds, and even stocks.

He went into detail about where the disruption for this chance would be coming from. Stating three main factors would come into play which would be collaborators, regulators, and challengers for the industry. His belief is these factors would bring about the quickest change, but regulators for the financial industry would be in a better position to make changes in other areas.

Moving to the New Model May Happen Sooner than Expected

Yermack also strong believes the quickest course of action for the industry to move over to a blockchain model is to explore the corporate elections of shareholders. This same avenue is also being explored by Nasdaq at this time, so movement to the new model could be in the future.

He explained how voting at corporate elections is inefficient concerning vote counting. The majority of the voting results are usually minus or plus 5% of their original number, so the end results are not accurate.

The current model in the financial industry also faces many of its own challenges. This includes skewed voting results, various ledgers of ownership, maintaining a company the company in the current model, and other issues that have arisen from sticking with the current model.

Interest in blockchains has started to rise with even Broadridge stating the current monopoly on the system is inefficient, especially concerning corporate elections. Yermack also went into detail how the majority of corporate elections tend to favor proposals put forward by management. He strongly believes these issues could be dealt with, if not eliminate completely, through the use of a blockchain based model system.