Blockchain Could Address NYSE Trading Issues

Blockchain Could Address NYSE Trading Issues


By Jakub Lazurek

04 Jun 2024 (about 1 month ago)

2 min read


Experts suggest blockchain technology could prevent NYSE trading glitches, highlighting the benefits of decentralized networks for financial market stability.

Recent glitches at the New York Stock Exchange (NYSE) exposed weaknesses in centralized trading systems. Chainlink’s co-founder suggests that decentralized networks offer accurate, tamper-proof data. Bitcoin’s stable network uptime showcases blockchain's potential in financial markets.

On Monday, a software update glitch caused the NYSE to halt trading for about 40 stocks. Some trades showed a 99% drop in companies like Warren Buffett’s Berkshire Hathaway Inc. The issue was fixed in about 45 minutes by switching to a backup data center.

Decentralization could prevent such halts. The forced pause began around 09:45 in New York due to a software update that affected the Securities Information Processor, which consolidates quotes from various exchanges. At 09:50, traders exchanged Berkshire Class A shares at $185.10, far below the Friday closing price of $627,400. The NYSE later canceled trades made at or below $603,718.30 between 09:50 and 09:51.

The glitch didn't impact Nasdaq-listed shares and had minimal market impact. It occurred during a transition to one-day settlements, down from two, known as T+1. Last Thursday, the S&P 500 Index lacked live pricing for over an hour due to another glitch.

Sergey Nazarov, co-founder of Chainlink, stressed that centralized systems have major weaknesses. He suggested that decentralized oracle networks, which Chainlink pioneered, could reduce these risks by providing tamper-proof data. These networks gather data from various sources and use consensus mechanisms to ensure accuracy, preventing erroneous trades and price manipulations.

Oracle networks like Chainlink supply smart contracts with the real-world data they need, decentralizing data validation and avoiding single points of failure. Adopting blockchain tech allows for real-time verification and automatic responses to anomalies, improving market reliability and transparency.

Edward Snowden humorously noted, "Bitcoin fixes this." Crypto fans often use this phrase to promote the technology. Despite the humor, Bitcoin's blockchain-based system is less prone to trading halts like the NYSE's.

Bitcoin has a 99.99% uptime record with only two downtime events, the last over ten years ago. However, most Bitcoin trading occurs on centralized exchanges, which can also experience outages. Recent NYSE glitches highlight the weaknesses of centralized trading systems. Experts believe decentralized networks, like blockchain, could solve these issues.

Chainlink’s decentralized oracle networks offer accurate, tamper-proof data and reduce risks associated with centralization. This ensures data integrity and prevents trading errors. Blockchain's real-time verification and automated responses can enhance financial market reliability and transparency. The financial sector must explore innovative solutions like blockchain to address these vulnerabilities and improve market stability.

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