3 Ways Blockchain Technology Is Changing How We Invest
The blockchain is about more than cryptocurrencies: it serves as a kind of immutable ledger, showing publicly who owns what, in a way that is, according to enthusiasts, perfectly secure.
Although blockchain has conceivable applications across industry, nowhere does it seem more at home than in the world of investing. By its nature, investing involves the trading of intangible items, like shares, between individuals who don’t know each other — the world of investing needs a technology that can facilitate transfers of ownership in a trustless environment.
Thanks to automated trading software, shares trade hands at extremely high frequencies, so we also need something better than old-fashioned brokers to act as middlemen. We need something fast, secure, and self-correcting. Blockchain promises all this and more.
Blockchain Will Allow Investors To Bypass Trusted Intermediarie
Right now, if you want to invest in real estate, startups, or struggling companies, you need to go through some kind of intermediary, whether that’s a private equity broker, a real estate fund manager, or somebody else. Investors need experts who they can trust to perform transactions on their behalf, doing things like checking that the assets are real and are legally obtainable. But, of course, their services aren’t free. Annual charges can eat as much as 2 per cent of the value of the investment per year, whether it makes money or not.
Blockchain gives investors more choices. It will enable them to bypass traditional, trusted third-parties and deal direct with the owners of assets. The blockchain will ensure that there’s a permanent record of the transfer of ownership that everyone in the network agrees upon.
Divisibility Of Ownership
Suppose that you own a valuable piece of art, sports memorabilia, or expensive wine. Let’s say that you don’t want to sell the complete item but want to raise money by issues shares. If you own a Rembrandt, you could sell 10 per cent of it for, say, $100,000, bagging the cash yourself. These types of transactions are difficult without the blockchain because it’s costly to record who owns what, and how much. But with blockchain, the process is much simpler.
In theory, you could divide up a valuable painting you own and raise cash. The blockchain would then create a permanent record of the sale so that everyone could agree who owns what. When the time comes to sell the painting for the full-value to somebody else, each owner would receive funds in proportion to their level of ownership.
Reduced Bank Settlement Times
When you perform a transaction, it takes time for banks to talk to each other and agree to the debit of one account and the credit of another. We trust banks to do this on our behalf, but the process still involves time and, sometimes, people.
Blockchain promises to eliminate this lag. With blockchain, there’s no need for a trusted third-party to oversee a transaction. Instead, the money transfers from one person to another with the completion of a new block in the chain. There’s no need to wait days for an international transfer.