How Blockchain Is Reshaping Investment Landscapes

By Sunil Sonkar
2 Min Read
How Blockchain Is Reshaping Investment Landscapes

In the expansive and dynamic world of finance, blockchain has emerged as a transformative force. Particularly in the form of decentralized finance (DeFi), the new technology is reshaping investment landscapes, drawing parallels to how smartphones revolutionized communication.

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DeFi, operating on decentralized blockchain networks like Ethereum, stands in stark contrast to traditional finance (TradFi), which relies on centralized institutions such as banks and brokers. DeFi is better because it removes the middlemen, making transactions faster, cheaper and easier for everyone. The transparency inherent in DeFi transactions, recorded on decentralized networks, adds an extra layer of security, making it challenging for hackers to manipulate or steal user funds.

The exponential growth of the global DeFi market is evident in the Total Value Locked (TVL), which surged from $601 million in 2020 to an impressive $239 billion in 2022. The increase happened because blockchain got better, people worldwide accepted cryptocurrency as an important type of asset and the idea of tokenization became popular.

Digital security tokens, thanks to new ideas in blockchain, are changing how things work in the securities industry. Serving as a digital alternative to the cumbersome paper-based market, these tokens, representing financial asset classes like equities and fixed-income funds, utilize blockchain-based Distributed Ledger Technology (DLT) for secure recording and verification of ownership.

Despite the promises and potential of tokenization and digital securities, there remains a lack of awareness and understanding, particularly among ‘Mom-and-Pop’ investors. Analogous to teaching a grandparent to use a smartphone, educating the public about the benefits of digital security requires patience and a gradual revelation.

Accessible investing, facilitated by the elimination of centralized institutions, brings financial services to previously underserved populations without access to traditional banking systems. Also, thanks to tokenization, people can own a part of things and spread their investments, reaching assets they couldn’t before. This makes investing available to more people.

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