The Democratisation of Finance: ETFs and Blockchain in Unison

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This is number 2 of a multi-part article series. Tune in next Thursday for part 3 where we dive into the similarities of ETFs and blockchain when it comes to tokenisation. Read our previous article here. 

In our last article (above) we went through the efficiency comparisons between ETFs and blockchain and spoke about things like how the programmability of smart contracts can automate processes and embed complex logic into transactions, much like the creation/redemption mechanism in ETFs. Now it’s onto our next topic around democratisation.

Background

Financial markets have, historically, been domains of the privileged — the high barriers to entry and opaque operations made access to these markets a challenge for the average individual. However, the advent of Exchange Traded Funds (ETFs) and blockchain technology has been instrumental in transforming this landscape. Both have not just enhanced the efficiency and transparency of financial markets, but have also democratised access, empowering millions of individuals worldwide.

ETFs: Opening Up New Investment Horizons

Before the emergence of ETFs, investing in diverse portfolios often required significant capital and financial acumen. For example, an investor wishing to gain exposure to the entire S&P 500 would need to buy each of the 500 stocks individually — an impractical endeavor for the average investor.

ETFs were a game-changer. By bundling a variety of securities into one fund that trades on an exchange like a single stock, ETFs provided a solution to this challenge. Akin to a bus tour that provides access to multiple sights with one ticket, ETFs opened up diversified investment opportunities that were once the preserve of the wealthy or the professional investor. Whether it was gaining exposure to a broad market index, a specific industry, or even commodities, ETFs unlocked new investment avenues, democratising the investment landscape.

Blockchain: Breaking Down Financial Barriers

Similarly, blockchain technology has brought about a new era of financial inclusivity. Traditionally, financial transactions, particularly international ones, were subject to substantial fees and required the involvement of banks or other financial intermediaries. This often presented a barrier for people in regions with limited banking infrastructure.

By decentraliing trust and providing a transparent, secure platform for peer-to-peer transactions, blockchain is making financial services more accessible. It is akin to replacing a toll road with a free highway, allowing everyone, regardless of their financial standing, to participate in the global economy.

Blockchain also paves the way for financial inclusivity through its foundational role in cryptocurrencies. Cryptocurrencies, which are entirely digital and borderless, have allowed people in underbanked or unbanked regions to engage in financial activities, such as saving, investing, and transferring money.

Furthermore, the advent of Decentralised Finance (DeFi) — a blockchain-based form of finance that does not rely on central financial intermediaries — has the potential to unlock unprecedented access to financial services. From borrowing and lending platforms to decentralised exchanges and tokenised assets, DeFi is rewriting the rules of financial accessibility.

Democratisation Through Education

Another parallel between ETFs and blockchain lies in their role in financial education. ETFs, due to their simplicity, have played a vital role in introducing individuals to the concept of investing in diversified portfolios. Blockchain, similarly, is educating people about the concept of decentralisation and digital assets, as well as enhancing understanding of how technology can eliminate the need for traditional financial intermediaries.

The Road Ahead

Much like ETFs helped democratise investing, blockchain technology is making strides in democratising financial transactions. Both are leveling the playing field, ensuring that financial markets and services are not just the playgrounds of a privileged few, but arenas where everyone can participate.

As we move forward, these groundbreaking innovations continue to provide a blueprint for how technology can transform the finance sector, making it more efficient, transparent, and inclusive. And just as we now see ETFs as an integral part of our financial system, it’s not hard to envision a future where blockchain technology holds a similar standing.

See you next Thursday for part 3 where we dive into the similarities of blockchain and ETFs when we look at asset tokenisation!

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Mark
Monfort

Mark drives innovation with his deep understanding of AI, blockchain, and data technologies. His experience spans over 15 years of contributions to finance, technology, and operational strategy across Australia, Europe, and North America.

In 2021, he transitioned from Head of Data and Technology at a leading Australian accounting firm to startups. Prior to this, he worked in equity and macroeconomic research in the capital markets space.

Mark brings a passion for data and insights to NotCentralised. His understanding of AI and blockchain technology is central to the development of workplace productivity and financial system modernisation products, including SIKE and Layer-C. Mark’s dynamic and solutions-focused methods enable the navigation of complex technological landscapes and new market potentials.

Mark holds an Executive Master’s and a Bachelor of Commerce. He led the creation of the Australian DeFi Association and serves on the advisory board for the Data Science and AI Association of Australia. His commitment to such communities demonstrates his enthusiasm for emerging technologies and vision of positive change through technology adoption.

Nick
Bishop

Nick spearheads product strategy and institutional business development, leveraging a rich background spanning 23 years in capital markets and financial services across the UK, the US, and APAC.

In 2020, Nick transitioned into startups, bringing extensive experience in asset management and corporate advisory from roles including Director, Head of Australian Fixed Income at Abrdn and Managing Director, Head of Corporate Credit at Gresham Partners. His expertise extends to client management across the government and private sectors.

With a First Class degree in Law and Criminology and Chartered Financial Analyst experience since 2002, Nick is known for his energetic and creative approach, quickly appraising business models and identifying market opportunities.

Beyond his role at NotCentralised, Nick actively contributes to multiple startups and SMEs, holding various Board and advisory positions and applying his institutional expertise to early-stage ventures. Nick is fascinated by emerging technologies with significant societal impact and loves to immerse himself in nature.

Arturo
Rodriguez

Arturo leads product development and software engineering, applying over two decades of experience in technology, capital markets, and data science. With his years of programming expertise, Arturo smoothly transitioned into blockchain, AI, and machine learning.

Arturo has built and sold technology startups across Europe, following quant derivatives roles in global investment banks. His prior experience includes data projects for the NHS in the UK, Strategic Technology Advisor at Land Insight, and Senior Advisor to OpenInsight, where he built predictive models for vessel usage in commodity markets.

A mathematics and statistics graduate from Stockholm University, Arturo’s early grounding in logic problems and data manipulation techniques is evident in his practical applications. His work building equity derivative pricing models for Merrill Lynch and Royal Bank of Scotland showcased Arturo’s highly specialised skillset.

Arturo relocated from London to Australia in 2020. Beyond NotCentralised, his passion for technology and industry involvement extends to the Australian DeFi Association, which he co-founded, and regular contributions to the Data Science and AI Association.