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Blockchain technology and the evolving investment portfolios

By Manu Awasthy

Blockchain or distributed ledger technology (DLT) has gained popularity in a variety of industries. Following the rise in popularity of cryptocurrencies, they entered the mainstream, giving rise to new investment opportunities, sectors, and vehicles. The development of these technologies is being fueled by the emergence of new models and use cases. However, the primary tool that propelled this technology to new heights was cryptocurrency, particularly bitcoin.

Years after the Bitcoin network’s genesis block was published, blockchain technology has revolutionised the way people invest their money, with many crypto platforms having much more lenient requirements for investors than traditional finance or TradeFi. Let us delve into how blockchain technology is evolving investment habits.

Blockchain technology: enabler of smart investments

Blockchain technology has developed quickly and produced a number of variations since its inception. Today’s blockchain technology enables the secure exchange of digital assets without the need for a centralised intermediary. The key characteristics of blockchain are that it is digital, decentralised, uses cryptography, has smart contracts, has a consensus mechanism, and is immutable, real-time, and secure. As a result, the investment process is changing and due to its numerous advantages of blockchain technology, new use cases outside of digital currencies operated by decentralised networks are beginning to emerge.

Orchestrating convenience 

Investing in cryptocurrencies through blockchain platforms is more convenient than traditional investment methods. Many exchanges still do not ask users to verify their identities, even though some only require it when certain thresholds are reached. The investment portfolios based on blockchain technology benefit once more from this. In the past, traditional markets frequently only allowed accredited investors and high-net-worth individuals to participate. However, with the rise of cryptocurrencies and blockchain technology, any investor with a crypto wallet can now invest in a hassle free manner. 

With platforms utilising blockchain technology, investors have access to a level of transparency that is noticeably higher than with other asset classes. In contrast to TradeFi investors who can review quarterly reports published by a self-reporting corporation, crypto investors can examine data on the performance of a decentralised protocol without permission and monitor key indicators in real-time or historically. Processes that take place entirely on a blockchain are often completed faster and with clearer assurances of finality because they are fully digital and eliminate intermediaries. Furthermore, transactions can be conducted anonymously, with one’s digital address or wallet serving as the only identifying factor.

New investment avenues

Since they are more tech-savvy and technologically literate, so-called digital natives like millennials and Gen-Z are more drawn to digital money. Cryptocurrency offers a variety of ways to generate wealth in addition to being easier for these young investors to access. The cryptocurrency and blockchain industries have a variety of subsectors, such as token sales and decentralised finance (DeFi). One of the first cryptocurrency subsectors to gain popularity was token sales. The tokens are available in different forms, including initial coin offerings (ICOs), initial exchange offerings (IEOs), initial decentralised exchange offerings (IDOs), and initial game offerings (IGOs). Furthermore, owing to shared interests in gaming, music, and the arts, NFTs (non-fungible tokens) are becoming a popular financial instrument among young investors.

All things considered

Although blockchain technology is still in its infancy, it has the potential to usher in a new digital era for many sectors of the world economy and financial system. The absence of centralization and lower entry barriers for cryptocurrency investors have sparked a lot of interest in the market in emerging nations. Due to the many advantages of blockchain technology, there are fewer barriers for investors to enter the cryptocurrency market. Since they are not dependent on a broker or middleman to manage their holdings, investors also have more control over their money.

When the risks involved are understood and fairly compensated, blockchain technology and crypto can open up a whole new world of investment opportunities. As more investors and businesses embrace blockchain technology, it is expected to become a more integral and seamless part of the investment landscape.

The author is founder, Centricity

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