The intersection of crypto and capital markets refers to the growing overlap between traditional financial systems and the emerging crypto industry. With the increasing popularity of cryptocurrencies, there is a growing interest among investors and institutions in the opportunities presented by this new asset class - as much as the establishment and the system hates Crypto, it is inevitable that Blockchain will take over at some point.
When people think of capital markets, they generally associate them with regulation, which is exactly why the public has no issue with the SEC meddling in many crypto projects and nobody bats an eye except for those familiar with the crypto space. This is because the financial sector is heavily regulated in order to protect investors and maintain stability in the markets - if only that was the real goal. The crypto industry, on the other hand, has historically been less regulated, with a focus on decentralization and avoiding interference from government and financial institutions - so basically, giving power back to the people by taking it from the systems that control every part of our lives.
However, as the crypto industry matures and more institutional investors enter the market, there is a growing recognition of the need for increased regulation in order to provide protection for investors and reduce the risks associated with investing in this new asset class - or at least that's what the mainstream media and the establishment wants us to think.
This is leading to a growing number of efforts to bridge the gap between the crypto and capital markets, including the development of regulated crypto exchanges and the launch of crypto-based financial products.
We can't fight this trend, they control the narrative, but we can still fight back.
Decentralization is the answer
Maybe not a fully decentralized system, but at least a system that continuously supervises the system in trustless way can happen very soon.
Cryptocurrency can be broadly categorized into two types based on the underlying architecture: decentralized and semi-decentralized.
Decentralized cryptocurrencies have a decentralized network of nodes that maintain a shared ledger. Transactions are verified by consensus, without the need for a central authority. This provides greater security and privacy for users.
Semi-decentralized platforms and protocols, such as DeFi and NFTs, build on top of decentralized infrastructure to provide additional functionalities. They leverage the security and decentralization of the underlying blockchain technology, but also introduce elements of centralization, such as the use of a central party to facilitate certain functions.
Centralized infrastructure, such as exchanges and wallets, are necessary to support the growth and adoption of decentralized and semi-decentralized cryptocurrencies. They provide user-friendly interfaces and other tools to make it easier for people to buy, sell, and use cryptocurrencies.
So now that this is clear, how can we integrate blockchain technology into traditional systems?
It's a long way up
The integration of blockchain technology into centralized assets has the potential to completely change the way traditional systems work by reducing their dependence on centralization - all we need is to convince them this is they way, which will be a gargantuan odyssey considering the system does not really want to operate in a better way, because the way it operates today helps only the top 1% and helps maintain the current status quo.
But let's say the system was willing to change for the betterment of the public - as if that would ever happen: Applying blockchain to stock markets could allow for faster, cheaper and more secure trading, as well as increased transparency and accessibility. This would provide new opportunities for investors and reduce the need for intermediaries, such as stockbrokers.
The integration of blockchain into central bank databases could bring about a more secure and transparent monetary system, enabling faster and more efficient transactions, as well as improved tracking and reporting of financial information.
Or let's talk public service entities like healthcare or education, can you imagine a country where this kind of services were completely transparent and immutable, where every single action taken by the entity was public and accountable for? Hell, imagine expenses and budgets being transparent... As I said, it's not happening soon, not because the answer is already here, but because the system will never go for it.
Just think about a blockchain based presidential election. Yeah right, in your dreams, bozo.
But you get the point, bringing crypto innovation into centralized areas to provides an opportunity to introduce less centralized rails and regulations by leveraging the decentralized nature of blockchain technology, would evolve traditional systems into more secure, efficient, transparent and fair entities.
Private entities are also limited
Asymmetric information refers to a situation where one party has more or better information than another party in a transaction. This can create an imbalance of power, as the party with more information has an advantage in negotiating better terms. In the traditional financial system, this often benefits large institutions, such as banks and corporations, at the expense of individuals and small businesses.
The issues that entities face when handling asymmetric information can be significant, particularly in the context of complex financial transactions. The lack of transparency and the difficulty of verifying the accuracy of information can lead to errors and mismanagement, resulting in financial losses or systemic risk.
With the rapidly expanding surface area of financial activity, companies are facing new challenges in managing asymmetric information. The sheer volume of transactions, the increasing complexity of financial products and the speed at which financial information is generated and transmitted make it difficult for entities to keep up.
Blockchain technology offers a potential solution to these challenges by enabling greater transparency and verifiability in financial transactions. By creating a decentralized and immutable ledger of transactions, blockchain can reduce the need for intermediaries and increase the reliability of financial information. This can help to reduce asymmetric information and create a more level playing field for all parties involved.
I see a better case for Blockchain in the private sector, in fact many traditional companies are slowly but surely adopting blockchain tech into their daily activities. This makes me bullish in comparison to the scenario the public sector shows.
Blockchain does it better
Non-blockchain technology is limited compared to blockchain in several key ways. One of the main limitations of traditional technology is its inefficiency, which can result in high costs, slow processes, and a lack of transparency.
In contrast, blockchain technology is designed to be efficient and cost-effective. This is achieved through its decentralized and consensus-driven architecture, which eliminates the need for intermediaries and enables real-time and secure transactions.
Examples of how blockchain can improve efficiency in various areas include:
KYC on-chain: Blockchain technology can be used to securely and efficiently store and verify customer identity information, reducing the need for manual processing and increasing the speed and accuracy of customer onboarding.
Network effects: Blockchain can create network effects by enabling the secure exchange of value and information between individuals and organizations. This results in greater efficiency, as transactions can occur directly between parties without the need for intermediaries.
Loyalty rewards: Blockchain-based loyalty programs can be more efficient and cost-effective than traditional loyalty programs, as they can automate the tracking and distribution of rewards and eliminate the need for manual processing.
Influencer payments: Blockchain can be used to securely and efficiently pay influencers in fiat currency or product, reducing the cost and time involved in traditional payment processes.
Shareholder revenue and dividends: Blockchain-based shareholder management systems can streamline the distribution of revenue and dividends, enabling faster and more secure payments to shareholders.
In conclusion, non-blockchain technology is limited compared to blockchain in terms of efficiency. Blockchain's decentralized architecture, real-time processing and secure storage of data offers significant advantages in various areas, such as customer onboarding, network effects, loyalty programs, influencer payments, and shareholder management.
Is there a right way?
There are many ways, there's no right way for this generational change to take place.
Blockchain is the future, and securities on-chain will be a prevalent and important player very soon. I'm not talking about the SEC attacking every other crypto company like they have been doing so in the past years, I'm talking about blockchain powering the traditional systems in order to offer a transparent, incorruptible, censorship-proof service to the public.
While blockchain technology offers numerous benefits, such as increased transparency, reduced costs, and improved efficiency, it is still a developing technology with challenges that need to be addressed, such as scalability, user adoption, and regulatory compliance. But achieving this is just a matter of when, not if.
The concept of an incorruptible bank, powered by blockchain technology, holds significant potential to benefit everyone by creating a more secure, transparent, and efficient financial system. This could help to reduce financial crime, increase access to financial services for underserved communities, and provide greater opportunities for wealth creation.
And more importantly, this will eventually tie the hands of the bad players in the system, which is the ultimate goal as blockchain technology develops. Blockchain and Bitcoin was created to fight the system in many ways, but the path we are taking today leads to blockchain being an enable and a controller instead of an enemy of the state.