Investing Opportunities Beyond The Hype Of Cryptocurrencies And Blockchains
So much hype about cryptocurrencies and blockchains was generated last year. Ordinary individuals and companies joined the bandwagon to capitalize on the efficient and cost-effective system.
Blockchains are public ledgers for cryptocurrency and other transactions. These are digitized and decentralized public records that can be verified by parties in a transaction and also by those who are connected to the network. The system, known as distributed ledger technology (DLT), eliminates the middleman and allows for more efficient transactions.
Aside from cryptocurrency applications, many advocates also recommended that the system should also be used in other non-financial applications. These include voting systems, registration systems for weapon and vehicles, medical records, and or even for confirming ownership of valuable properties such as artworks.
According to Robert Herjavec of Shark Tank, Bitcoin and blockchain are likely to remain. He thinks that the cryptocurrency system will eventually be regulated. He also predicted that the value of Bitcoin will continue to rise above the 20,000 high last month.
Herjavec has a positive outlook about the future of blockchain because of the inherent security of the transaction, picturing automated scanning systems linked to bank accounts to come. Within a decade it would be possible to automatically identify a person using the system—someone buying from a store can be automatically be charged based on the item.
DLT has an excellent potential to simplify a wide range of operations. New systems are being designed based on the technology as replacements for the inefficient financial systems.
Some accounting and payment networks in the financial industry are too expensive and inefficient compared to blockchains. According to a Goldman Sachs report, the system could result in significant savings for the stock market operations of up to US$6 billion annually.
Growth potential of the system
Many companies like Global Blockchain Technologies Corp. (TSXV:BLOC.V, OTC:BLKCF) are capitalizing on the potential growth of blockchain related technologies. Investment companies like BLOC focus on business incubation of startups, providing services for both investors and the entrepreneurs.
On the other hand, some big businesses are starting to be transformed into blockchain companies. For instance, the online retailer Overstock (OSTK) has recently opened up to more investors. Its new trading system for its majority-owned tZero is largely based on blockchain technology.
Overstock, tZero and Siebert Financial are planning to become partners in offering discounted online trading in the first three months of this year. New members will initially be at $2.99 per trade but will eventually be offered the discounted price of $1.99 per trade for the members of its Club O rewards program.
Currently, the blockchain platform is mainly used for short selling activities in the stock market. It had offered $80 billion to $120 billion worth of lendable securities in November of last year. The CEO of Overstock, however, hopes that the platform will address the abusive short-selling practices of prime brokerage firms.
Meanwhile, startups such as Abra, TransferWise and Circle are companies supported by Goldman Sachs to radically reduce the transaction fees of global remittances. In 2016 alone, the global remittances amounted to more than US$400 billion and the transaction fees at around seven percent. The cost of remittances will be reduced or eliminated with the aid of the new system.