WHAT CAN BLOCKCHAIN DO FOR TRADITIONAL FINANCIAL INVESTMENTS 💵?

neferpitou (48)in #bitcoin • 6 years ago (edited)

No one can downplay the astronomical rise that digital assets have had for almost a decade now. However, the current progress is going to pale in comparison with the next phase of application of blockchain which is tokenization. Tokenization is defined as ‘registering assets on a blockchain’ enabling for verification and ease of liquidity. The benefits that blockchain technology boasts can also be equally applied in overhauling existing financial industry models, to create a more robust ecosystem. The financial system is a very delicate topic, because of all the trust needed to have them work properly. In 2018 we are seeing blockchain protocols for finance emerging such as DarcMatter(which am going to focus on in this article).

A lot of trust is needed in the financial industry. Bitcoin has proven to be a tried-and-tested protocol for backing up all the flaws of the current monetary system, earning accolades such as a future global reserve currency. Currently, there are billions of monetary transactions that are carried out each day, for micro-payments and even more important for traditional assets. The current portfolio management is done in the traditional way involving a lot of paperwork and bureaucracy. Blockchain technology can revolutionize the way we financial services are disseminated.

✔️In essence, the main benefit of application of blockchain is restoring trust and doing away with the bureaucracy, high cost of management and asset tracking(a lot of money has to be paid to lawyers and accountants to ensure proper contracts established) and low liquidity that is characteristic of the usual way of asset management.
✔️Currently, due to the disjointed nature of the current financial system a lot of loopholes that can be exploited for money laundering. This has been previously abused by CEOs and other people in power.
✔️In addition, lengthy KYC procedures and high cost of maintaining such records further creates need for blockchain identity management.
✔️It is difficult to easily divide traditional assets for easy movement.
✔️The fact that the traditional asset industry has always been a preserve of the wealthy is another opportunity that blockchain technology can be able to impact.

Security tokens are the main reserve of tokenization. The current volatility being experienced with the cryptocurrency markets today is heavily influenced by the fact that most of the prices are speculative. There are very few projects that have been able to achieve project-ready use-cases today. In contrast, security tokens are established against real assets. It is a no-brainer that securities are less volatile than the current utility tokens, because they are components of a more mature financial space. This means they are more secure, and already recognized in regulation, thus cannot be easily manipulated. The luxury of a global investor base around the clock is another valuable gain. Unlike traditional asset markets which only operate within specific pre-defined hours, the cryptocurrency market never sleeps. You only need to log into your account online and you can be able to carry out your transactions.

Smart Contracts

The use of smart contracts to carry out contracts can greatly reduce the amount of verification and paperwork that is involved in traditional asset management. The added advantage of being able to code the required regulations into the underlying protocol is another valuable proposition for using blockchain technology. This reduces the number of custodians (hence less time and cost) required today to facilitate portfolio management.

This is the value that the DarcMatter platform seeks to leverage when they incorporate blockchain technology into their business model. The DarcMatter project will be launched on top of the NEM blockchain and it will be interesting to see the performance of a NEM project. Early signs are very encouraging. Soft cap already reached and hardcap target is close to being achieved. There is plenty of reason to be excited about this project.