is imaginable that countries that can free their dead capital will be able to bundle and sell the interests in these assets across a global marketplace. This would include assets like transparent mortgage-backed securities for new real estate developments in Colombia or Peru.
In the future, countries will be able to free up their dead capital. Owners of undeveloped land and un-financeable properties will then have the opportunity to sell the interests in these assets across a global marketplace.
These assets will be appealing because asset managers will be able to actively parse underperforming assets given the transparency and capability of one being substituted in place of another through blockchain-based technology. The use of blockchains to manage these assets will give managers the power always to own top-performing securities, removing the rotten apples, reclassifying them, and selling them as new securities.
For non-institutional customers, micro-investments will be an attractive outlet that is enabled globally and locally through blockchain trading platforms. Using blockchain technology will also give them the means of investing in companies and their specific activities without having minimums or going through intermediaries that take a percentage of the investment.
Decentralized autonomous organizations (DAOs) are already out there and making DAO investment pools happen for a few risk-tolerant and more technically savvy investors. It may be some time before an institutional investor utilizes one of these vehicles, or a portfolio manager recommends putting money into a DAO-based vehicle for their clients.
DAOs remove a lot of the necessary paperwork and bureaucracy involved in investing by creating a blockchain-based voting system and giving shares to those who invest in their product. To any blockchain, the “code as law” concept makes it unforgiving. The risks are many, particularly when poorly written code executes in unintended ways. The consequences are that hacks to this system can be severe. The transparent nature of the system and the poor code give hackers a wider attack vector and allow them to attack multiple times as they gain more and more information with each attack.
In the following section, we discuss the effects and benefits of blockchain technology on the world economy.
Border-free payroll
Our world is global, and companies don’t have borders. Instant and nearly free payroll is enticing and would save a lot of headaches for organizations. But there are drawbacks, too.
The largest risks will be with the loss of funds through hacking. If you’re compensated in cryptocurrency, and you are hacked, it will be impossible to retrieve your funds. There’s no dispute resolution center. There’s no customer service to complain to for the loss of these funds. Thieves of digital currency have global access while being somewhat anonymous. The hacker could be anywhere.
With the current structure of blockchains, consumers are responsible for their own security. Currently, customers don’t have the main burden of protecting and insuring themselves from a loss. Larger companies and governments offer protection and insurance, and they have for as long as anyone can remember. Regular individuals haven’t had to protect themselves in this manner since they stopped holding their own gold during medieval times (more or less).
These challenges haven’t stopped companies from processing payroll using cryptocurrency. Bitwage and BitPay are both competing in the market for payroll processing via Bitcoin. Bitwage allows employees and independent contractors to receive part of their paychecks in cryptocurrency, even if their employers don’t offer the option. BitPay, on the other hand, has payroll service providers Zuman and Incoin integrated into its payment and payroll APIs. Again, early adoption is happening in areas that had nonexistent or inadequate solutions before.
Faster and better trade
Blockchains will facilitate faster and possibly more inclusive trade. Global trade finance has become restricted in recent years, and some banks, like Barclays, have even pulled out of growing African markets. They have left behind a vacuum for the finance trade, as companies still need capital to ship their goods.
DAOs and micro investments could meet that need and give investors more profitable returns than are currently available on the market. Transparency of all the goods being sold, secure identity, and seamless global tracking that is all connected to a blockchain would open up this opportunity for small investors.
The interoperability between currencies, which companies like Ripple facilitate, will also allow for more trade because they offer flexible ways of calculating foreign exchange rates than through the transfer mechanisms. The introduction of more popular digital currencies into foreign currency exchanges will add to the adaptability and integration of underserved markets.
BitPesa is a company that converts M-pesa phone minutes from Kenya into Bitcoin. With this technology, it offers businesses a faster and cheaper way to send or receive payments between Africa and China. The trade between Africa and China is a market of over $170 billion. It takes days to settle payments across borders, and the fees are high. When you use BitPesa’s digital platform, payments are instantaneous and cheap.
Guaranteed payments
Guaranteed payments that are permitted through blockchain-backed transactions will increase trade in places where trust is low. Poorer countries can compete on the same playing field as wealthier nations within these types of systems. As this happens over the next ten years, the global economies will shift. The cost of commodities and labor may increase.
Global companies pay their employees based on competitive pricing, as well as on employees’ previous salaries. If blockchains allow for equality across economic divides, it won’t happen overnight. Developers and other knowledge workers would be the exception because it’ll be easier for them to support themselves based on anonymous work.
Financial inclusion and equal global trade are very important topics for governments. Adoption of digital currencies will more likely take place nationwide in small and developing countries. Most large countries have decentralized power structures that prevent quick changes to vital systems like money.
The central power structures of small countries will allow them to leapfrog over legacy infrastructure and bureaucracy. For example, most African and South American countries don’t have landlines or addresses, but they all have smartphones and the ability to create cryptocurrency wallets. The missing piece is overall trade liquidity and capacity to pay for basic needs such as utilities, rent, and food through a cryptocurrency.
Micropayments: The new nature of transactions
Micropayments are the new form of transactions. Credit card companies may use blockchain technology to settle the transaction, reduce fraud, and lower their own costs.
Global institutions like Visa and MasterCard, which provide the benefit of delayed payments, will always be needed by consumers in capitalistic societies. Even if the backend changes, you still have the same access points for customers. But physical cards will go away. In fact, that’s happening now, even without blockchain technology. With blockchain technology, the customer identities behind payments will be more hardened against theft.
People still need credit to operate a business and get by personally. Credit card companies will keep making money through transaction fees. Credit runs the world, and capital markets will always exist in our current social structure. The cost of sending money between groups will decrease, but that’s a good thing for financial institutions. They want to focus on the service of providing their customers with the best choices in their investment or banking markets.
Squeezing Out Fraud
Bitcoin was created as an answer to the financial crisis, where fraud and other unethical actions caused the world economy to collapse. It shifts from a “trust or doesn’t trust” view of the world to a trustless system. This subtle difference is lost to most. A trustless system