How a cryptocurrency-powered financial industry will emerge


August 18, 2017 | 5:25 pm
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The reports of skyrocketing cryptocurrency prices still have many financial experts wondering “where is this going?” Hopefully Nigerian financial institutions will not wait for too long before taking a leap.

It might feel like diving into a “blackhole”, I know, which is why you must have an appetite for high risk to venture into the crypto world.

A few days ago, a senior analyst with Dentacoin Foundation, Mariam Nishanian reached out to BusinessDay to share her views on how the world of cryptocurrency is changing the global financial industry.

Everyone that have followed closely with development in crypto world would have observed the rate at which countries like Japan, Russia, so many others were declaring bitcoin as legal tender.

Nishanian believes that this development signifies that the stock market of nations could be substituting cryptocurrencies for the stock certificate. Along the same line, is the new trend in which several companies held their initial coin offerings (ICOs) as an alternative to IPOs for funding.

ICOs, she explained, is a means which cryptocurrency ventures raise funds, by passing the capita-raising process of venture capitalists. Unlike IPOs, ICOs are not companies, rather digital platforms with management rights of the digital assets and venture funds.

“With cryptocurrencies already hitting the mainstream, the blockchain is projected to replicate the action of the internet to media, by disrupting the financial system,” Nishanian noted.

A Changing financial system

Increasing optimism in the crypto universe is behind Nishanian’s view that blockchain will replace the monetary system. I have heard experts who will readily disagree. But she explains that blockchain technology is adopting a limited network of cryptocurrencies, and this is because blockchain is strongest when everyone is using the same system and at the same time enables people to be on the same platform. How will a new decentralised and automated financial system work? It will be powered by the bitcoin app.

“It doesn’t require a regulator to monitor financial compliance; the monetary policy is automated and allows the money supply to be without limits.

“Another instance is Dentacoin an Ethereum-based blockchain platform regulated by smart contracts that supports the dental community by building and creating solutions devoted to improving dental care quality worldwide with cryptocurrency value behind it,” Nishanian stated.

Here is the rest of Mariam Nishanian’s take on the emergence of a cryptocurrency powered financial system:

Can it find Success where Banks have failed?

The banking industry has acknowledged the emergence of blockchain and its threat to their operations. Banks are houses of storage, and they expend much in infrastructure and operations within a centralized system that is constantly at risk and being regulated by the government.  Blockchain disrupts the bank’s centralized nature and allows transparency in its transactions without the need of a middle man or a physical operational system. Everex, a blockchain startup is using technology to provide microcredit products and services. The poorest people in the world do not have access to savings, because of rural marginalization or cost of the physical structure.  65% of people across Asia, sub-Saharan Africa do not have a savings system and are therefore at higher risk of spending, and remaining poor. Technology is without boundaries, and more poor Adults in Africa and the poorest places in the world has access to the internet – 6 in every ten adults in Africa has access to the cyberspace. The implication of this is that cryptocurrencies can outdo banks inadequacies. The products and services that the traditional bank offers demand a lot of physical presence and documentation, which the blockchain provides alternatives. Blockchain offers a more efficient and stress-free lending system; by analyzing spending and loan access, in contrast with the traditional bank that pressure in collateral and payback means.

Emergence of ICOs

The amount of money raised from ICOs in 2017, is $1.2 billion and surpasses early stage of venture capitalist funding for start-ups.  ICOs are a way for start-ups to raise money from users, which allows them to own equal shares by buying stakes and receipt of digital currency. ICO is a new business model leveragingthe blockchain technology, allowing equity ownership in startups.  The leverage of ICOs is that supporters of the project are guaranteed of returns from their investment.  ICOs permits who ever has a cryptocurrency to join the technology investment initiative, which no longer requires the financial aid of venture capitalist but a validation and trust of the blockchain system.

The current financial system is inefficient because of its paper based processes and its vulnerability to attacks and system failures.  The cryptocurrency has the capacity of dealing in all financial operations without an individual presence. Human history is being revolutionized since people can do business based on a network consensus aided by cryptographic codes. Most firms in the financial industry are investing in blockchain solutions. This is because of the potential savings; Capgemini reported $16 billion could be saved up by consumers from blockchain annually. The future of the cryptocurrency is exciting because the current generation places a high value on technology and the digital space.

Bottom Line

There’s no denying that blockchain and cryptocurrency are changing the financial landscape, various sectors are starting to think of it not only as an exciting possibility but a revolution.

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August 18, 2017 | 5:25 pm
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