Blockchain technology and the evolving investment portfolios
By Manu Awasthy
Blockchain or distributed ledger technology (DLT) has gained popularity in a number of industries. Following the rise in popularity of cryptocurrencies, they entered the mainstream, giving rise to new investment opportunities, sectors and vehicles. The development of these technologies is driven by the emergence of new models and use cases. However, the primary tool that drove this technology to new heights was cryptocurrency, specifically bitcoin.
Years after the Bitcoin network’s genesis block was published, blockchain technology has revolutionized the way people invest their money, with many crypto platforms having much more lenient requirements for investors than traditional finance or TradeFi. Let’s delve into how blockchain technology is evolving investment habits.
Blockchain technology: enabling smart investments
Blockchain technology has developed rapidly and produced a number of variations since its inception. Today’s blockchain technology enables the secure exchange of digital assets without the need for a centralized intermediary. The key characteristics of blockchain are that it is digital, decentralized, uses cryptography, has smart contracts, has a consensus mechanism and is immutable, real-time and secure. As a result, the investment process is changing and due to its many advantages of blockchain technology, new use cases outside of digital currencies powered by decentralized networks are starting to emerge.
Convenient orchestration
Investing in cryptocurrencies through blockchain platforms is more convenient than traditional investment methods. Many exchanges still do not ask users to confirm their identity, although some only require it when certain thresholds are reached. The investment portfolios based on blockchain technology once again benefit from this. In the past, traditional markets often allowed only accredited investors and high net worth individuals to participate. But with the rise of cryptocurrencies and blockchain technology, any investor with a crypto wallet can now invest in a hassle-free manner.
With platforms that use blockchain technology, investors have access to a level of transparency that is noticeably higher than with other asset classes. Unlike TradeFi investors who can review quarterly reports published by a self-reporting company, crypto investors can examine data on the performance of a decentralized protocol without permission and monitor key indicators in real-time or historically. Processes that take place solely on a blockchain are often completed faster and with clearer assurances of finality because they are fully digital and eliminate intermediaries. Furthermore, transactions can be carried out anonymously, with one’s digital address or wallet as the only identifying factor.
New investment opportunities
Being more tech-savvy and technologically literate, so-called digital natives such as millennials and Gen-Z are more attracted to digital money. Cryptocurrency offers a variety of ways to generate wealth, as well as being easier for these young investors to access. The cryptocurrency and blockchain industry has a number of sub-sectors, such as token sales and decentralized finance (DeFi). One of the first cryptocurrency sub-sectors to gain popularity was token sales. The tokens are available in various forms, including initial coin offerings (ICOs), initial exchange offerings (IEOs), initial decentralized exchange offerings (IDOs), and initial game offerings (IGOs). Furthermore, due to shared interests in gaming, music and art, NFTs (non-fungible tokens) are becoming a popular financial instrument among young investors.
All things considered
Although blockchain technology is still in its infancy, it has the potential to usher in a new digital era for many sectors of the world economy and financial system. The absence of centralization and lower entry barriers for cryptocurrency investors has sparked great interest in the market in emerging nations. Due to the many benefits of blockchain technology, there are fewer barriers for investors to enter the cryptocurrency market. Since they are not dependent on a broker or intermediary to manage their holdings, investors also have more control over their money.
When the risks involved are understood and fairly compensated, blockchain technology and crypto can open up a whole new world of investment opportunities. As more investors and businesses embrace blockchain technology, it is expected to become a more integrated and seamless part of the investment landscape.
The author is the founder, Centricity
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