How Could Blockchain Technology Change the World of Finance?

Blockchain technology, a series of decentralized digital ledgers that record and verify transactions, is fundamentally transforming our financial landscape. Blockchain's potential extends beyond cryptocurrencies such as Bitcoin or Ethereum; its unique features promise to reshape the whole financial industry by offering cheaper, quicker, and safer methods for transactions, eliminating intermediaries, and creating new avenues for fundraising and margin trading.

Lowering Costs and Preventing Fraud

Blockchain, with its unprecedented security and transparency, could dramatically lower the costs for both financial institutions and consumers. It eliminates the need for expensive intermediaries, making transactions cheaper and more efficient. Banks, insurers, and auditors investing in blockchain solutions could save tens of billions of dollars they currently spend on maintaining their security infrastructure.

Moreover, blockchain provides virtually foolproof protection against fraud. Any type of asset — money, equities, bonds, contracts, deeds — can be stored and transferred digitally without any fear of fraudulent activities. This elimination of risk and cost would disrupt the traditional financial industry, shifting the paradigm in favor of the consumers.

Disrupting Traditional Transaction Systems

Blockchain technology empowers users to transact, forge agreements, and exchange value securely and instantaneously, without needing intermediaries for verification, record keeping, transaction clearing, or funds settling. Consequently, many areas of finance, such as identity and reputation management, payments and remittances, savings, credit, stock exchanges, insurance and risk management, as well as audit and tax functions, are ripe for a blockchain revolution.

In a world increasingly leaning toward digitalization and automation, financial institutions are racing to adapt to these changes to avoid obsolescence. The endgame for these entities is clear: reduce costs and ensure survival in an age where blockchain technology is gaining mass appeal.

Revolutionizing Fundraising

Traditional capital raising methods involve a myriad of parties such as angel investors, venture capitalists, and crowdfunding platforms like Kickstarter. However, these processes often come with mountains of fees and conditions. Blockchain technology presents a radical alternative: peer-to-peer fundraising.

Through global distributed share offerings, companies of any size can raise money. In 2016, blockchain companies raised $400 million from traditional venture investors and nearly $200 million through Initial Coin Offerings (ICOs). ICOs streamline the fundraising process, making it more efficient and cost-effective, thereby lowering the cost of capital for both entrepreneurs and investors.

Impact on Margin Trading

Lastly, blockchain technology could significantly impact the world of margin trading. Blockchain's transparency and security features can make lending and borrowing processes smoother and safer. Traditional margin trading, where investors borrow money to buy stocks, can benefit from blockchain by providing real-time, accurate information on transactions and balances. This will not only reduce the risks involved in margin trading but also create a more level playing field for all participants.

Blockchain technology has the potential to revolutionize the financial industry and margin trading. Its decentralization, transparency, security, and elimination of intermediaries offer compelling advantages that could reshape the world of finance. As blockchain continues to evolve and mature, we can expect to see an even greater impact on the way we conduct financial transactions, raise capital, and trade on margins. The future of finance may very well be intertwined with the fate of blockchain technology.

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