Financial Markets 3.0- brought to you by Tezos - PBWS 2020 Panel Recap

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With the introduction of digital assets, financial markets have been changing rapidly, and we have entered a period commonly known as “financial markets 3.0.”  What does that mean exactly, and what has changed? At PBWS 2020: Online Edition, we invited experts from leading companies in the sector to explore what implications this new generation has for various stakeholders involved, for example investors, end users, exchanges, and what they may look like in the future.  

Speakers include: 

• Lukas Enzersdorfer-Konrad (Bitpanda)
• Massimo Morini (Algorand)
• Anton Golub (Flovtec)
• James Wo (Digital Finance Group)
• Moderator: Zahreddine Touag (Woorton)

Here’s a preview of some key takeaways: 

1. How are new financial markets different from Financial Markets 2.0? 
2. Who takes the responsibility if there is a security issue with the code? 
3. What are the key benefits of Financial Markets 3.0 for the end users?
4. What are the benefits for the investor/ issuer side?
5. What will the next generation of markets look like? 

1. How are these new financial markets different from Financial Markets 2.0? 

New DeFi financial markets have changed the game. It’s now possible to buy fractions of stocks, coins, tokens, and other assets, so that you can create a diversified portfolio, even without large amounts of capital. That is not possible with traditional stocks, where users can only buy one stock at a time, at a fixed price. Additionally, traders now have access to 24/7 trading, which is not possible on traditional stock exchanges, as they are only open during fixed hours.  In basic terms, DeFi markets offer far greater accessibility than traditional markets. 

2. Who takes the responsibility if there is a security issue with the code? 

Whereas previously an intermediary such as a trader or an exchange would have been contacted by a regular if there was a security breach, with decentralized ledgers this is not so simple. Regulators want to know how any kind of financial entity mitigates risk across all levels, and they really look into the systems of financial services as they are being set up, to ensure how the risk is taken care of. 

3. What are the key benefits of Financial Markets 3.0 for the end users?

First and foremost, there are generally less costs associated with these new markets, because everything is already done on the blockchain.  Additionally, they can also benefit from features such as fraction stocks and 24/7 trading. DeFi markets have also opened up new opportunities for the unbanked or those who normally do not have access to opportunities to invest, and with this technology they only need internet access and a computer (or sometimes even just a mobile phone) and they can learn how to invest.) This opens up whole new demographics to the world of investing and crypto. 

4. What are the benefits for the investor/ issuer side?

The markets have become more fair, because all of the players are on the same blockchain and all of the information is visible and accessible to everyone.  Fairness is the ultimate goal for the market, and with DeFi any traders can trade openly with institutions, or other financial intermediaries much more easily and all in the same place.  Additionally, companies can raise capital faster and more easily because they can raise it directly on-chain, and therefore don’t need to go through the IPO and other processes.  

5. What will the next generation of markets look like? 

The panelists closed the discussion by exploring the possibility that in the future, clients’ money will not be held on exchanges, and will instead be held with specific financial intermediaries in order to increase security.  The industry is still changing and there will be many more innovations to come in the future.