Consortium Blockchain-Based Decentralized Stock Exchange Platform

Abstract

The global implementation architecture of the traditional stock market distributes responsibilities and data across different intermediaries, including financial and governmental organizations. Each organization manages its system and collaborates with the others to facilitate trading on the stock exchange platform, and typically buy-sell orders go through different parties before settlement. This design architecture that involves a complex chain of intermediaries has several limitations and shortcomings, such as a single point of failure, a longer time for financial settlements, and weak transparency. Blockchain technology consists of a network of computer nodes that securely share a common ledger without the need of having any kind of intermediaries. In this paper, we present a novel blockchain-based architecture for a fully decentralized stock market. Our architecture is based on a private Ethereum blockchain to create a consortium network leveraging organizations that are already involved in the traditional stock exchange to act as validating nodes. In our architecture, the stock exchange trading logic is completely implemented on a smart contract, while considering the existing governmental market regulations. Since the new platform does not introduce significant changes to the stock exchange trading logic and does not eliminate any of the traditional parties from the system, our proposal promotes efficient adoption and deployment of decentralized stock exchange platforms. In addition, we present a proof of concept implementation of the new architecture, including the smart contract for trade exchange, as well as a virtualization-based test network to assess the platform performance. The test network consists of virtual nodes that run the developed stock exchange smart contract where we measure the buy-sell orders throughput and latency under different network sizes and trading workload scenarios. The obtained results have shown that the proposed trading platform can reach a throughput of 311.8 tx/sec, which is equivalent to 89% of the optimal throughput when the sending rate is 350 tx/sec. This throughput is largely sufficient to meet the requirement of major stock exchanges, such as Singapore stock market. INDEX TERMS Blockchain, Smart contract, Stock Exchange, Trading.

Privacy-Preserving Framework for Blockchain-Based Stock Exchange Platform

“…In this section, we discuss and highlight the privacy requirements of the decentralized blockchain-based stock exchange platform. We first provide an overview of the architectural design of a blockchain-based decentralized stock exchange by referring to our previous work in [9]. The proposed architecture in [9] achieves full decentralization without introducing significant changes to the existing stock exchange trading logic, neither eliminating any of the traditional involved organizations.…”

“…We first provide an overview of the architectural design of a blockchain-based decentralized stock exchange by referring to our previous work in [9]. The proposed architecture in [9] achieves full decentralization without introducing significant changes to the existing stock exchange trading logic, neither eliminating any of the traditional involved organizations. We, therefore, discuss the general privacy requirements in the stock exchange concerning regulation and then translate them to specific requirements by considering the decentralized stock exchange architecture in [9].…”

“…The main organizations/entities involved in the stock exchange include investors, Listed company, Broker, Custodian, Stock Exchange (SE), Central Securities Depository (CSD), Government, Financial Market Authority (FMA), and Central Bank (CB). For more details about the role of each entity, we refer the reader to [9]. Among them, FMA is responsible for regulating the market by monitoring the investor's trading accounts in case of any suspicious trades and ensuring that all the involved entities are following the regulation.…”

“…In [9], the traditional stock exchange has been transformed into a decentralized blockchain-based platform using a consortium (permissioned) Ethereum network. The proposed architecture in FIGURE 1 ensures high availability by distributing the ledger containing the trade-related transactions across all the network participants that are known and trusted.…”

“…Recently, blockchain technology has been introduced in the financial industry as an effective means towards a more secure, transparent, and decentralized financial system without relying on intermediaries [7]. For stock exchange, some recent efforts in [8] and [9] have been devoted to designing new decentralized stock exchange platforms that overcome traditional stock market limitations such as the presence of a single point of failure, the long time of financial settlements, VOLUME 4, 2016 and the limited transparency offered to the investors. Nevertheless, these aforementioned efforts have not considered the preservation of the privacy of investors' identities and that of their balances.…”