Decentralized Stock Exchange Implementation using Ethereum

Traditional stock exchange systems are centralized and have high transaction fees, third party brokerage and less secure environment vulnerable to attacks. Blockchain decentralizes the exchange and creates a fair trading environment for every individual. This paper aims to implement a decentralized stock exchange based on blockchain. The proposed system aims to bring down the transaction costs and reduce the time taken to settle orders and eliminate the need of third parties for executing trades. Three different contracts one for buyer, seller and exchange are used to separate stock exchange functionality and optimize transaction costs. The system is implemented using Ethereum. The system is evaluated for scalability of number of transactions and scalability of number of nodes using sampled trading data from NASDAQ. Transaction fees for the miner at 16.5 Gwei is 99.98% lesser than the brokerage fees of traditional traders for the same transactions. Experimental results of the proposed method show that it is possible to eliminate third party brokerages, reduce transaction fees to almost 0 and create a peer-to-peer trading environment that does not require a central exchange.