Every year Gartner evaluates new technologies and ranks them along a hype cycle curve. The curve starts with an innovation trigger, followed by a surge in inflated expectations triggered by success and failure stories from first-time users. This of course leads to a large drop in the onset of disillusionment, the turning point for technology producers when iterations are implemented successfully or not. Don’t worry, there is a gradual ascent through the Enlightenment Slope, where innovation in terms of realistic functionality is better understood and accepted and eventually lands on the productivity plateau. This is the sweet spot where paradigm shift technologies are socially accepted and widely recognized.
This year, non-fungible tokens (NFTs) pride themselves on the high point of inflated expectations; we know what’s next, but with the stablecoin resistance, the renaming of Facebook to Meta, and the finite regulatory attention on DeFi, we can safely assume that the blockchain in general is headed towards enlightenment.
The most obvious financial applications of blockchain are in credit, insurance, money transfers, and audits, but there are new, powerful, and often overlooked uses in the traditional investment space. In the following I outline three areas in which blockchain is slowly making waves in the noisy capital markets.
Threatening Traditional Exchange Mechanics
Some of the oldest and lucrative institutions in the world last century are located in the cleaning business (Nyse, Nasdaq), custody (BNY Mellon, JPMorgan Chase) and Brokerage (Loyalty, Avantgarde). All three services are traditionally required for securities trading, which means that power, control, and price / cost are completely centralized.
Blockchain, on the other hand, is immutable, decentralized and transparent. Blockchain companies have recognized that assets on a blockchain can theoretically be traded precisely, securely and immutable that disintermediates traditional institutional actors. Price data on the blockchain, for example, is one way of knowing exactly how an instrument should be valued at the time of a transaction. With the help of oracles along the blockchain, assets can be valued, traded, liquidated, stored and insured.
It will take you to negotiate the lion-sharing negotiations to move from traditional exchange into Blockchains, and it is possible that some traditional stock market will launch blockchains but I think it’s inevitable. This will make clearing, custody and brokerage relatively obsolete, and traditional market data deals will also be affected. In a world where many of us are turning to blockchain to buy Tesla stock, trading volume would get significant enough to be a powerful and accurate source of price and benchmark data. The market data source then becomes the blockchain, not traditional exchanges. That is (at least) a transfer of value of $ 32 billion.
Democratizing Traditionally Exclusive Markets
There are dozen of lenses out there that you can use to look at the possibilities around the NFT space. Whether you “play” or not, it’s hard to ignore that we’re heading towards the Matrix or Metaverse if you prefer. Non-fungible digital assets have real value when applied to the gaming industry. Audio NFTs have the potential to bring true independence to musicians traditionally committed to record labels, managers, and others.
But perhaps one of the most compelling arguments in favor of NFTs is the simplest: We have a new medium of creative exchange, such as art auctions. It’s difficult for the average person to compete in an industry where a Van Gogh can be off the shelf for more than $ 80 million. However, art – and creator – is everywhere. There is a market for cool, visually appealing, and modern things. Blockchain can ensure that when digitizing art and creativity, these assets are secure, immutable, unique, valuable and rare. They can also be split up, increasing Main Street’s democratized medium for creative and artistic exchange.
It’s hard to argue that this is very different from trading in art, rare baseball cards, or any other physical or collectible asset that most are familiar with. What makes blockchain different is that it is accessible, (generally) affordable, and decentralized. , democratized and applicable in the entire digital world, blockchain traditionally democratizes exclusive markets with a volume of $10 billion.
Pouring Fuel on the Fintech Fire
Over the past two years, several factors have contributed to a sharp surge in retail trading, including the Covid19 pandemic, the WallStreetBets / GameStop trend, and early fintech innovations like Robinhood. These influences have pushed new entrants straight into the arms of the blockchain-influenced sandbox: more accessible, new and fascinating markets.
Main Street has always battled for resources when it comes to investing, however; exclusive tools like Bloomberg Terminals appreciate average traders from the game. This problem is made worse by the sheer volume of new retailers entering the market – where can they find data, resources, tools, education? Thanks to blockchain, this new generation of retailers demands more and offers fintech innovators enormous opportunities to develop solutions.
The startups of Fintech became quick to implement options such as commercial platforms, cryptographic wallets, investment education websites, accessible data and research tools as well as much more for this new market. The recent advances in blockchain have indirectly created a multi-billion dollar ripple effect in an already rapidly growing fintech industry by creating new markets.
As blockchain climbs the slope of enlightenment, its most ardent uses are impossible to ignore. New technologies create new worlds, but they also change old territories. Traditional markets have to prepare for a massive shock: adopt, evolve, or fade. Every generation faces a paradigm shift, and that’s where wealth is created.
