The
application of blockchain technology is become widespread as the days go by and
financial derivatives are now on the list of areas blockchain will improve. In
fact blockchain is already improving them.
Derivatives
are contract types that have their value derived from financial assets
(financial security, such as a stock) that have been agreed upon. The question
now is how does Blockchiain get in the mix? This can be achieved by changing
the concept of derivatives from conventional finance and bringing blockchain
into the system. This brings us to blockchain derivatives.
Blockchain
derivatives can be said to be financial derivatives that have their value
derived from blockchain assets instead of financial assets.
Cryptocurrency
and other blockchain based assets can be used as far as blockchain derivatives
are concerned.
Also,
blockchain technology can be used to better conventional financial derivatives
by eliminating the need for banks, mediators or third parties, to manage the
derivative transactions. A blockchain based program known as smart contract
will ensure that the parties involved are guaranteed complete transparency in
any transactions carried out. Transactions will be open and secure and also payment
will be automated.
Blockchain
technology will also work to increase cost effectiveness in derivatives,
reducing the excessive charges with come with banks and other third parties in
the system.
Blockchain
contracts will be miles ahead of conventional financial derivatives, and sooner
or later, financial institutions that refuse to get carried along will be left
behind in this process of advancement.
In
the nearest future, blockchain technology will be part and parcel of every
system and financial derivatives will not be left out. If it is not blockchain
contract, it is no contract at all.
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