There is a reason why traditional financial markets often get the “blockchain can’t compete” label thrown at them. Traditional financial markets have a highly efficient and secure network that makes trading very fast and easy. Furthermore, the financial institutions that operate within these markets are highly trusted and have a long history of being fair and neutral.
On the other hand, the blockchain is still a very new and volatile technology, making it highly risky to bet on. However, as time goes by and more and more people start to see the true potential of blockchain technology, more and more investors are starting to believe that this is the future of finance.
What is the Blockchain?
The blockchain is a digital ledger that is secured by cryptography preventing anyone from tampering with the data. This ledger is shared by all users and exists beyond the control of any one institution or individual creating a trustless and transparent environment.
The purpose of the blockchain is to create a decentralized and trustworthy system of record keeping. This is achieved through the use of cryptography, a secure communications protocol, and public/private key pairs empowering users with digital signatures.
Why Should You Bet on the Blockchain?
If you believe that the future of finance lies in the blockchain, then why not bet on it? The blockchain has the potential to completely change the way we look at financial markets as we know them. Since the blockchain is open source and accessible to anyone with an internet connection, new innovation and experimentation is constantly being driven by the platform’s users creating a dynamic and ever-changing landscape.
What this means for investors is that instead of placing their trust in one institution or individual, they can now place their trust in the entire system creating an environment where everyone is held accountable for their actions. While this may seem like a huge leap forward, it’s actually a return to how things were before the 2008 financial crisis when individual traders held the power to make or break a company.
One of the main differences between then and now is that with the blockchain, everyone including the regulators and the industry itself is working to keep up with the technology driving innovation and change to how we do business today. In the words of one industry expert, the blockchain “…is changing the way we think about trust in business and society”.
Decentralized Asset Management
One of the main ways the blockchain will affect your investments is in the way decentralized asset management will work. Decentralized asset management (or DAMP) means that the custody of your assets is kept separate from the management of your investments. This will likely make your life a lot easier not having to worry about transferring your holdings to a new trusted manager every time you make an investment.
With DAMP, not only do you not need to trust a third party with your money, you don’t need to trust the asset manager you choose either. This level of trust is nearly impossible to attain in today’s world, but with DAMP, it’s finally possible to invest in anything with complete peace of mind.
On the other hand, traditional investment management requires the use of a trusted third party (usually a bank or financial institution) to hold and manage your funds. While this may not seem like a problem at first, it can quickly become one when you consider the large sums of money that many institutions handle every day. The chances of your assets being mishandled or missing completely are always there, creating an environment of distrust and anxiety for investors.
One of the biggest problems that still plagues the financial industry is lack of transparency. When something goes wrong in a financial transaction, there is often no clear indicator as to who is to blame or what exactly happened. This makes it nearly impossible to identify the source of the problem and impossible to find a satisfactory solution. This type of opacity leaves the door open to uncertainty which frightens investors.
With the blockchain, this type of opacity is a thing of the past. Since every single transaction that occurs on the blockchain is recorded and available for all to see, there is no way to hide anything. This level of transparency will result in a much greater ability to pinpoint faults and inefficiencies within the system and bring about much needed change.
What this means for you as an investor is that when you place a bet on the blockchain, you are essentially placing a wager that everything you see and read about is totally accurate and reliable. While this may seem like a tall order, the chance to win $10,000 or more in just a few minutes is what keeps people logging on every day.
One of the things that always upset investors the most is paying expensive fees for the convenience of having their money managed by a professional. When it comes to investing, expensive doesn’t even begin to describe the kind of cost that is involved. The chances are you’ll spend more than you’ll make on average trading securities throughout the entire year. This is mainly due to the fact that modern day investment management is incredibly inefficient and outdated.
With the blockchain, all this changes. First and foremost, the cost of trading will decrease dramatically. This is mainly due to the fact that there is no longer a centralized authority charging expensive fees for the privilege of using their services. Also, with the rise of cryptocurrency, the cost of sending and receiving money has decreased dramatically as well providing a further incentive for all participants to enter the blockchain ecosystem.
The combination of lower trading costs and increasing cryptocurrency prices means that finally, investing on an affordable basis is once again possible creating an environment where individuals, institutions and even small businesses can enter the market without risk of financial ruin.
In conclusion, the blockchain is a new and exciting technology that will likely change how we look at financial markets and how we deal with investments in the future. Since the blockchain is open source and accessible to anyone willing to learn, new innovation and experimentation is constantly being driven by its users creating a landscape that is both dynamic and ever-changing.
What this means for you as an investor is that instead of placing your trust in one institution or individual, you can now place your trust in the entire system creating a level of security and transparency unseen in traditional finance.