Having emerged in just the last decade, cryptocurrency is still seen as a nascent experiment by most, rather than a legitimate contender in the world of high finance. After all, stock exchanges have been around since the 1600s, while investment funds have existed since the 1700s. The global stock market today is worth a mind-boggling $68 trillion, according to The World Bank.
Given these figures, it's easy to discount the relevance of cryptocurrencies, which collectively have a market cap of around $200 billion. However, I believe cryptocurrency deserves a serious look by financial professionals, lest they fall into the same complacency trap that led to the death of companies like Blockbuster.
In spite of the millions of articles and countless forums out there on how to succeed as a business, it all comes down to one thing: providing the best product. Consumers are always looking for what's cheaper, faster, flashier or in some way better than the competition.
When it comes to finding an asset manager or investment fund, consumers are no different. They prefer companies that instill trust and, more specifically, are looking for things like liquidity, variety in fund types, innovation and low investment minimums.
In the case of funds, trust largely comes down to transparency. Can you, as an investor, verify the fund holdings and interactions with the fund in real time? Traditional funds, whether it's Vanguard or BlackRock, don't offer this level of insight. However, some blockchain-based investment specialists are able to do so, given that transparency is one of the core tenets of blockchain.
On a practical level, investors in some blockchain-based funds can view a smart contract of the fund. A smart contract, essentially, is code that executes itself on the blockchain. Because this code is on the blockchain, it's visible to everyone. There is no central controller or gatekeeper limiting its visibility.
While transparency ...