All economies are built on the basic premise of bartering. Before the creation of currencies, humans exchanged goods by trading one good (or a basket of goods) for another. If someone wanted some of his neighbor’s catch from the day, perhaps he would trade three shucks of corn from his field for one fish–thus initiating a trade.
As society advanced, humans began to use precious metals to assign value to objects. No longer did people trade three shucks of corn for a fish–no, now they had to give the fisherman a small silver coin. Pretty soon, precious metals were the foundations of advancing economies.
Fast forward to today, and the world’s economies look much different. The gold standard is no longer in place, and fiat currencies rule the world. There are complex investment products beyond traditional stocks, bonds, and cash. Now investors can buy swaps, options, and futures to hedge positions or bet on future market conditions. The highly complex investment world is changing everyday, but it also started with a simple barter.
Now, after experiencing almost a decade of success, blockchain and cryptocurrencies are looking to branch out into investment services. The buy and hold strategy has left some people very well off– a simple glance at Bitcoin’s chart reveals how much it’s appreciated this year alone. But as cryptocurrencies grow, many are wondering what’s next for the up and coming investment vehicle.
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How is Blockchain Technology Currently Deployed in the Mainstream World?
Several years ago, companies began creating blockchain wallets–think of a digital “bank account” where crypto assets are stored–that automatically converted cryptocurrencies into fiat currencies. This cut out the manual labor side of crypto coin transactions. Users no longer had to convert the currencies using their own calculations.
Then, in early 2015, cryptocurrency debit cards were launched that brought Bitcoin into everyday life. These debit cards allow digital coins to be used like a regular currency. They link the card issuer, the wallet, and the coin exchange together, giving users the ability to “swipe” (scan) their cards on regular purchases just like a traditional bank debit card. These cryptocurrencies cards give the masses access to the complex blockchain world, as all the computing is done behind the scenes.
Additionally, many blockchain platforms offer B2B and B2C payment services. As cryptocurrencies have dramatically risen in popularity, companies have seen the increasing need to accommodate blockchain transactions. These companies can now participate in blockchain merchant processing services that help businesses conduct operations using cryptocurrency transactions.
The Next Logical Steps
The next logical step is for blockchain based companies to offer investment services through different product offerings. They’ve already tackled some general financial necessities–wallets, debit cards, and merchant transactions. Next, they are hoping to revolutionize more advanced investment industries.
With rising prices comes rising valuations. This is as true of global stock markets as it is of digital coins. The rapid run up in prices this year has understandably left some investors anxious about the next cryptocurrency sell off.
Aware of this, blockchain-based companies like CryptoPay are looking to create blockchain based brokerage service accounts. On the CryptoPay platform, for example, these accounts will work side by side with traditional asset classes — stocks, bonds, and derivatives –to allows users to have cryptocurrency assets alongside other holdings. The result is that investors can move in and out of asset classes as they choose — allowing them to protect against both fiat and cryptocurrency downturns.
Another issue confronting cryptocurrency users is receiving and sending payments from a crypto-coin related source. These payments are well and good when done between other blockchain based platforms. But once a traditional financial services entity is involved, there will likely ensue a compliance nightmare.
In response to this, CryptoPay and others are creating platforms that allow cryptocurrency accounts to be listed with an IBAN (international bank account number) attached. The account will be in the name of the customer, rather than the blockchain company. This will eliminate confusion and allow digital coin users to conduct regular banking operations without an added compliance headache.
Finally, blockchain based companies are developing peer-to-peer marketplaces, specifically to launch ICOs — initial coin offerings. Lack of investor protection has resulted in some ugly cases of fraud, leaving government agencies across the world skeptical of blockchain technology.
In response to this skepticism and out of a heart to protect investors, some companies are launching ICO platforms that offer themselves as a regulatory body. They will act as a go between for issuers and investors, all the while ensuring that both parties’ demands are met. They will also offer underwriting services while working with reputable regulators to ensure that fraud doesn’t take place.
Fiat currency based economies started small and developed over the years, and the same is true with cryptocurrencies and blockchain technology. As society begins to see increasing demand for cryptocurrency banking and investment needs, many companies are striving to revolutionize the investment world. Some, like CryptoPay, have upcoming ICOs and are hoping to make a splash by entering this promising field.