Blockchain and Ethereum Platform Could Replace Banks in Raising Capital for Innovators and Small Businesses

from Rogue Money:

A little more than a week ago, Russian President Vladimir Putin met personally with Vitalik Buterin at the St. Petersburg International Economic Forum (SPIEF) to discuss how his creation, the Ethereum Blockchain, could be used to help integrate not only the Eurasian power’s energy industry onto this technology, but also to broach the idea of what it would take to create a sovereign cryptocurrency as well. And when you add in Cliff High’s ongoing forecasts that China is focusing on cryptocurrencies and blockchain technology to facilitate commerce in their Belt and Road projects, then the inevitability of cryptocurrencies and derivatives of the blockchain replacing current financial infrastructures is pretty much a foregone conclusion.

Two things: first, at the current rate of gains in Ethereum market share (and loss in Bitcoin’s), the inflection point between the two will come not in months, or weeks, but perhaps days.

Second, said inflection point may come in even faster if Vladimir Putin has anything to say about it, because as Bloomberg reports, “Ethereum has caught the attention of none other than the Russian president as a potential tool to help Russia diversify its economy beyond oil and gas.” Putin met Ethereum’s young founder Vitalik Buterin on the sidelines of the St. Petersburg Economic Forum last week and supported his plans to build contacts with local partners to implement blockchain technology in Russia, according to a statement on Kremlin’s website. – Zerohedge

History shows that barriers to trade normally reside upon the whims of men and governments, as seen in the 1920’s and 30’s when isolationism and tariffs helped plunge the world into a massive global depression. And even today the West continues to wallow in the dying paradigm of creating ‘Free Trade Agreements’ that are chock full of onerous regulations, restrictions, and quite often benefits to one side over another. And as such trade can be not only complicated when it comes to both production and delivery, but also long in duration as the paperwork to facilitate even one trade can last days or even weeks.

But as the well respected economist and anarcho-capitalist Doug Casey points out from recent examples, use of the blockchain over current bureaucratic trade methodologies turned the duration for approval down from days and weeks to just a few hours.

Recently, I wrote about a small $100,000 trade of cheese and butter.

Why?

This one trade changed 400 years of history in just four hours.

How so? Normally, it would take 10 days to handle the paperwork. But this trade concluded in less than four hours.

The solution: a blockchain platform that streamlined the entire process.

While the trade was small, it was big for the $7 trillion trade finance industry.

What exactly is trade finance?

It’s when two companies in different countries want to buy and sell from each other. They use a bank to guarantee the transaction…

For more than 400 years, trade finance hasn’t changed much. It requires a mountain of paperwork. And all the parties involved spend a lot of time proving that they truly own what they say they own. – International Man

Yet blockchain technology, and in particular the platform being created by Ethereum, isn’t limited to just trade or cryptocurrencies. In fact, with the advent of banks refusing to perform their primary function of lending capital to businesses following the 2008 banking and financial crisis, it has opened the door for a new paradigm to emerge that will replace the bank entirely in how innovation and business is funded in the future.

The ICO will replace the IPO

ICO means Initial Coin Offering, and is nearly equivalent to one buying stock in a company that goes public during an IPO (Initial Public Offering). Only in the future, rather than a company or innovator having to go to venture capitalists for funding, or a broker like Goldman Sachs to underwrite an IPO (where in both cases the business entity would sacrifice a large portion of their equity to pay for either of them), they can instead create an ICO on the Ethereum blockchain where they would sell equity to investors through the distribution of a specialized cryptocurrencies that would replace old fashioned ‘stocks’ as collateral, and these could then be easily traded on an exchange.

Almost in the way crowdfunding has revolutionized borrowing as banks have refrained from lending for both safe and risky endeavors.

The world has just barely scratched the surface of what can be done using blockchain technology, and almost every day some new idea is brought forth in how it can be used to change finance forever. But like with any new innovation that threatens the status quo, some nations and governments will willingly accept the new paradigm, while others will fight it to the death because in this instance, it will mean an incredible loss of their power and control, but isn’t that why the blockchain was created for in the first place?

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