Since the blockchain was first introduced to the world more than a decade ago, the technology has aroused the interest of many sectors, mainly in the financial industry.

This technology will fundamentally change the way financial transactions are carried out, with profound implications for investors, since it helps to reduce costs such as cross-border payments that cost an average of 7%, while reducing time.

Blockchain can bridge this gap as it is specifically designed as a financial technology that is geographically non-discriminatory, without limits and therefore means that cross-border transactions can take place more seamlessly.

In the world of trading, this also means that settlement processes eliminate the intermediaries involved in the process, reducing costs and allowing transactions and settlements between counterparties to potentially occur instantly.

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Each user can see the complete record of all transactions, which are made public and verifiable to a certain extent. Verification is also not completed by a centralized entity, but by an entire network of validators.

The decline in the use of cash and the corresponding rise in electronic payment systems in major economies has prompted governments around the world to explore the development of central bank digital currencies (CBDCs), which take advantage of decentralized and secure blockchain technology.

CBDCs have implications for financial systems as a whole, one of which is reducing friction in domestic payment systems, as well as facilitating and reducing the cost of cross-border transfers.

The blockchain also has the potential to transform the way investors invest in physical assets.

Tokenization, through this technology, fragments the ownership of an asset into digital tokens and makes them accessible to groups of investors. Examples of assets that can be tokenized include tangible assets such as real estate, art, or ships, as well as intangible assets such as licences.

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For now, we are seeing great potential in real estate investing, as technology addresses many common challenges in this asset class.

The benefits of tokenized real estate include: improved liquidity, fractional ownership, and increased transparency and security.

On the other hand, scalability remains a weakness of the blockchain, as there has yet to be a blockchain that has scaled enough to handle large numbers of transactions.

The fixed size of a block for hard information is limited, which means that only a couple of transactions can be made in a single block. Scalability is being addressed in many ways, from second-tier solutions to upgrades and improvements to current blockchains, so we look forward to improvements on the topic.

That said, and taking the aforementioned advantages into consideration, it is clear that blockchain technology offers the potential for an overhaul, or at least fundamental change, of the financial markets.

The financial industry would need to navigate this revolution, by understanding the different ways in which blockchain technology could potentially impact different stakeholders, including investors, and adapt to ensure adequate safeguards are in place for the financial system user community.

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