Many analysts believe that blockchain has the potential to change investing. Investors are amazed at the flexibility of blockchain and crypotcurrencies like bitcoin. Many department stores are using the technology to help with their supply chain management. Stores also use blockchain to assist with eliminating contamination. With that being said, here is a look at several ways that show how blockchain is changing investing.
Lower Trading Costs
The distributed ledger technology will lead to fewer intermediaries, which means that fewer investors will be paid during trading. This has lead many investors to believe that there will be lower trading costs. Research has shown that the capital markets spend billions of dollars every year on securities servicing fees. Blockchain is expected to create a faster and cheaper banking system.
Quick Settlements
During the trading process, post trade settlements can take a few days because of the intermediaries involved. Due to the distributed ledger technology, settlements may occur within minutes. Analysts point out that settlements happen immediately in peer to peer exchanges.
More Transparency
Thanks to distributed ledger technology like blockchain, users can see an extended listing of every transaction. Every trade would add another piece to the chain so that users can see who owns the security. The blockchain may also be amended through different regulations that look at each trade and quickly detect fraudulent activity. This will help improve the transparency of the capital markets.
Around The Clock Worldwide Trading
Distributed ledger technology will allow exchanges to remain active at all times. The technology eliminates boundaries and late night trading difficulties. Some stock exchanges are already implementing the technology by overhauling after hours margin calls. Users were able to take care of collateral transfers within a few minutes.
Improved Communication
The improved transparency that blockchain creates could also help improve investor’s relationships with their portfolio managers. Blockchain should help trades and account transactions get shared in an easier fashion. Investment managers would be able to analyze the portfolio’s performance in real time. Blockchain can also help the on boarding process by giving parties access to important profile information. Transferring assets between institutions may occur quicker than ever before.
Tokenized Trading Becomes Popular
Tokenized trading could impact real estate investments. Tokenized crowdfunding gives investors the opportunity to allocate their funds across different real estate investments. Tokenized trading can make it easier for investors to receive distributions. Distributions are often held in a trust for investors. With the help of blockchain, managers could provide investors with tokens that they can use however they like.
Better Crowdfunding Opportunities
Initial Coin Offerings are simplifying capital fundraising for investors. Companies give investors coins that take the place of capital. The coins can give holders the right to a future service or they can provide a share of the company’s equity. Be aware that The SEC has warned investors that some initial coin offerings could present substantial risks for loss or manipulation.
Improved Private Equity Trading
Blockchain would eliminate the process of trying to match buyers and sellers for each transaction. Private equity coins could change hands without needing a middleman.
Increased Liquidity
Analysts believe that blockchain would eliminate the difficulty of transferring ownership in complex assets such as real estate. If shares were registered on the blockchain, that would simplify both the exit and entry points. This will reduce the lock up time on private investments. This gives investors some control over their portfolio.
An Improved Voting Process
Blockchain could also impact investor voting in the future. Some companies are experimenting with an e-voting system to help manage voting periods more efficiently. The system relies on blockchain technology to increase transparency by providing real time voting results on a ledger.
New Trades Become Possible
Tokenized trading has made it possible to trade shares that otherwise would not be possible. Tokenization has the ability to convert the value of a special object across the blockchain. An investor’s patent may become tradable soon. Investors can turn their valuable items into tokens for others to purchase.
The Future