Blockchain Technology and the World of Finance
These days, all you need is an internet connection to send any amount of money anywhere in the world. But that is just the tip of the iceberg of how the financial system is potentially being affected. Legacy financial systems are under threat of being overthrown as the world moves towards unprecedented economic fluidity through blockchain technology. Human interaction is becoming less and less vital for delivering digital assets. It is all becoming automated and super-swift and tradable digital assets are projected to soon even include stocks, bonds, investments, and other kinds of financial instruments. But why should an established financial system that has been operating consistently for so long be disrupted? What major issues can blockchain technology can solve?
A Look at History
To start exploring potential future developments, we need to glance at the past and look at similar phenomena, like that which happened to the communications system. The first American national postal service system was initiated in the 17th century with taverns across America distributing letters to and from British colonists. Over the years, the system gradually developed but went through a major change in the late 20th century, namely with the invention of an automated and rapid messaging system known as email. The centralized digital format made communication easier, cheaper, and quicker than ever before. It wasn't just about sending letters. The distribution of music and movies changed radically as well. If you were born later than the 1990s, chances are you have never encountered a cassette or VHS tape. Digitization drastically enhanced all these aspects of our lives. And now, the finance industry can be drastically disrupted as well.
The Benefits of Bringing Together Blockchain and Financial Assets
The way we trade financial assets is currently rather antiquated in that the various assets remain in separate systems. Public stocks are traded through broker databases. Private equities live within company servers. Real estate deeds still rely on paper and are just filed away. Blockchain, however, can bring them together all within one automated and standardized system that can be more transparent, more accurate, and more compliant. Because of the immutability of the ledger that makes up the chain, abuse can be better detected and more efficiently policed. Blockchain can also provide for more opportunities, such as the ability to own shares of assets that were previously indivisible, through the use of blockchain tokens. As a result, just as communications and media have progressed dramatically over the years, a major revolution in the world of finance is just over the horizon.