Blockchain and the Future of Finance
Up-and-coming technology is rapidly changing the way we conduct our daily lives, and the investment landscape is no exception. With the advent of blockchain technology and digital assets, the lines between the physical and the digital are becoming increasingly blurred, opening up new markets, products, and processes for both institutional and accredited investors.
Blockchain, the technology underpinning digital assets and ownership, was created in 2009 to record the ownership and movement of assets in a way that can be trusted and verified by any party. Blockchain is a distributed digital ledger that records transactions in a transparent and secure manner. It consists of a chain of blocks, each containing a set of transactions, and once a block is added to the chain, it cannot be altered, making blockchain tamper-proof and trustworthy. Therefore, blockchain enables trust between parties who may not know each other, removing the need for intermediaries and reducing transaction costs. Blockchain has been adopted by financial institutions worldwide, including some of the world’s largest banks like J.P. Morgan and HSBC, to tackle some key pain points in investment. Blockchain provides the transparency, reliability, and trust required for the creation of liquidity for previously illiquid assets, price discovery, and speed with which trades can reach finality.
Tokenization, the most exciting application to emerge from the innovation of blockchain and digital assets, offers unique programmable assets that can be natively digital or a twin of something in the real world. Tokenization is the process of representing real-world assets as digital tokens on a blockchain. These tokens can represent a wide range of assets, including real estate, art, commodities, and even stocks and bonds. By tokenizing assets, they can be traded, divided, and managed more easily and efficiently. Tokens have investable value, interact with software, and gather data. They are already being used extensively in finance and investing for tokenized real-world credit assets such as loans, trade finance, invoice factoring, and securitization. Tokenization simplifies the distribution process, provides greater transparency on the flow of money, and even allows grant parcels to be fractionalized to reflect real-world behaviors.
Blockchain technology is maturing rapidly, with newer chains processing thousands of transactions per second with almost instantaneous finality. The newer technology also tackles the elephant in the room: sustainability. Regulators are evolving to meet the needs of this brave new world, applying existing rules for consumer protection to digital asset businesses, and taking strong action against money laundering.
The possibilities of blockchain and digital assets are endless, and they are here to be discovered. Transparent price discovery will remove opacity and uncertainty, changing the impact on price arbitrage. Asset registries and digital identity may one day combine on-chain to provide a single source of truth on asset ownership. These possibilities and more open up new markets, products, and processes for accredited investors. DwellFi is one such company working to provide access to private market investments through tokenization. By allowing investors to buy fractional ownership of real estate, private equity, and other investment opportunities, DwellFi is democratizing access to traditionally exclusive markets.
Blockchain technology and digital assets are transforming the traditional finance landscape, opening up new markets, products, and processes for institutional investors. Tokenization is the most exciting application to emerge from the innovation of blockchain and digital assets, offering unique programmable assets that have investable value, interact with software, and gather data. The possibilities are endless, and companies like DwellFi are working to democratize access to traditionally exclusive markets.