Blockchain will continue to innovate, disrupt several industries

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As active investors, we continue to evaluate its risks and opportunities.

The Medici accounting ledger developed during the 1500s advanced Europe’s economic growth—now blockchain has the potential to launch a new, global digital Renaissance, transforming financial services, supply chains, healthcare, backend offices, and more[1] , says Stephen Dover, Chief Market Strategist, Head of Franklin Templeton Investment Institute, Franklin Templeton.

“In 2018, we identified conditions that could make blockchain a potential disruptor for several industries. As active investors, we continue to evaluate its risks and opportunities.

“Blockchain’s biggest breakthroughs are democratisation and decentralised recordkeeping to establish trust between two internet strangers without a trusted intermediary.

“Blockchain’s innovations of tokenisation and fractionalised ownership of assets could unlock access to illiquid assets and provide broader access to non-public investments.[2]

“Blockchain could completely change how the financial services industry operates their back offices. Blockchain could also facilitate the consumer data-mining essential for marketing financial and other services,” says Dover.

He adds: “There are obstacles to blockchain-based money.

“Current blockchain technology can manage about five transactions per second whereas credit cards can handle over 1,500 transactions per second. Many experts believe that transaction-processing gaps will evolve and widen, the flip side of blockchain’s appealing, more secure platform.

“China is rapidly moving its currency, the renminbi, toward a central bank digital currency (CBDC). CBDCs allow for greater prevention of fraud or crime, enable instantaneous international transactions, reduce transaction costs, permit greater financial inclusion, and aid the provision of direct fiscal stimulus to individuals. China’s CBDC could accelerate the decline of the US dollar as the world’s leading reserve currency.

“The US lags behind China in blockchain infrastructure and security. President Joe Biden’s infrastructure proposals include securing US blockchain infrastructure.

“Blockchain’s story may sound familiar as its evolution and cycles parallel the internet. Each were dismissed by critics, yet both have potential to unlock seemingly limitless innovation,”  says Dover.

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[1]  National Institutes of Health, Applications of blockchain in ensuring the security and privacy of electronic health record systems: A survey, July 15, 2020.
[2] Seeking Alpha, Franklin Resources, Inc. (BEN) CEO Jenny Johnson on Q2 2021 Results—Earnings Call Transcript, May 4, 2021.

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