Many today are aware of the existence of blockchain thanks to the crypto hype. With hindsight, talking about crypto in 2014 normal people would be looking at you as if you were an alien. Blockchain was not even recognized as a standalone technology. Traditional investors laughed. Visionary investors invested.
Today cryptos are hot, blockchain is hot as well, and luckily for the pioneers, decentralized applications are becoming a thing as many companies are lining up to release their beta platforms.
Cryptos are all on hype, and with good reason: they will reshape the world of software development in the next 5 years. And one sector is going to be affected the most: FINANCIAL SERVICES.
In order to see what we are envisioning, you have to think of a world beyond cryptocurrencies.
And boy do we believe investment banks are gonna be affected by the change!
So what does a blockchain do? A brick and mortar explanation is: think about the huge volumes of paper documents you have somewhere and think about a safe and easy solution to digitize, store them, tag them and use that tag for other to recognize them, so that you can transfer them safely.
It might not be sexy, but it is radically going to change how intermediaries in the financial system work. Think about the information banks have to store. Now think about that information being digital, becoming a token and being immediately transferable. Ok now you got it! This is blockchain and it goes much beyond cryptos. And it is also the reason we will see thousands of new tokens being created in the next few years.
We already have the millennials’ “token economy”, now we are heading towards a globally tokenized financial world.
With a focus on the financial sector, what will financial services look like 5 years from now? Well the answer will be know only with hindsight, but for sure blockchain will play a key role, which is confirmed by the massive amount of interest banks are putting in the technology lately.
The real innovation is coming by startups, like us among many others, but for sure we expect legacy intermediaries to start firing back deploying their own technologies, or buying blockchain startups through M&As.
If someone as powerful as JPMorgan’s Jamie Dimon criticized Bitcoin, there must be something cooking in the pan!
So we do not really know whether the names of the banks we recognize as such will be the same or whether new intermediaries will emerge. We do not even know how people are going to use the technology, as the transition to commercial success seem to require some acceptance of some processes not to be ruled by trustless code and of some authority or governance mechanisms in place.
To explain: the famous Ethereum scalability projects Plasma and Polkadot, both require a governance mechanism in place. Which is ironic in principle if we think about the motives Bitcoin was created (moving money without intermediaries and central intervention by governments or central banks), but very much needed for the technology to become even more powerful that today’s centralized server-based platforms.
SO WHAT WILL CHANGE? Have we gone all the path towards decentralization, just to head back to governance systems? Only time will tell. For sure blockchain brings a new level of accountability and transparency, more automation and one very spicy addition: DIGITAL TOKENS.
In fact, tokens allow to create an almost infinite scale effect around decentralized applications, as they allow to create networks around these tokens, making their users their stakeholders as much as their developers and early contributors. This gives a level of empowerment to everyone contributing to the network which is unprecedented and in the long run will favor newly create networks on legacy banking institutions.
What is our vision? Regardless of where cryptos move in terms of price and public interest, tokens will allow communities exist around networks, and this is going to result in a more decentralized, less concentrated and less risky financial ecosystem.
So call them as you like best, blockchain banks, token banks, decentralized investment banks, but be sure that, one way or another, you will interact with these institutions ruled by code.
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