In ancient times, people used what is now considered unusual in order to exchange money: precious metals, precious stones, pearls, and many other things. In modern times we have standardized forms of exchange in the form of cryptocurrencies. Crypto exchanges, which have historically catered primarily to retail investors, are starting to diversify their revenue streams by evolving to accommodate the very particular demands of banks, investment firms and other financial institutions, for example by extending credit. Today, almost every nation has its own form of fiat currency backed by no assets and issued by the government valued at its ability to serve as a tax credit. When we look back there’s actually not much difference between pearls and fiat currency as both of them are arbitrary means of a store of value.
The current problem with cryptocurrency is that it is not widely accepted as a form of exchange today, causing a need to perform an exchange to fiat in order to obtain liquidity. This creates a situation where the price of crypto is defined, not relative to the value of goods and services, but relative to its value in fiat or other cryptocurrencies it can be traded for. In such a situation, it becomes extremely volatile as there is no longer an asset to which it is possible to set its value against, but rather against other volatile currencies. The end result is that the price volatility in crypto is amplified by the volatility of all the currencies it can be traded against. This creates huge challenges for these exchanges, however, particularly in relation to their in-house technology which often isn’t fit for purpose nor capable of estimating risk with any degree of sophistication.
Cryptocurrencies offer cheaper and faster peer-to-peer payment options without the need to provide any personal details. Price volatility and the opportunity for speculative investments of cryptocurrencies encourage customers not to use cryptocurrencies to purchase goods and services but rather to trade it.
There is a great evolution clearly visible in the Crypto market. The reason behind this is the blockchain technology which is decentralized. Cryptocurrencies have gained a reputation and are reaching a larger audience because of the encrypted system. The whole system of the crypto market is decentralized which prevents any fraud activity. The crypto market is secure and private with no risk of tampering and hacking.
Cryptocurrency is the new phase of the technology-driven market. Crypto market has the potential to disrupt traditional market strategies.
Role of IEOs in Crypto Market
Initial Exchange Offerings are getting popular in cryptocurrencies these days. IEOs are all related to raising funds for cryptocurrency projects.
Given the reputational risk, cryptocurrency exchanges are totally incentivized to vet the token issuer and the quality of their offering. As a consequence, IEO exchanges develop a legally trustworthy relationship with token buyers they perform the due diligence that institutional investors traditionally invest in. Given the ubiquity of fraud in the ICO world, this is a huge benefit for token buyers that purchase IEOs from reputable cryptocurrency exchanges.
IEOs put high criteria for all upcoming fundings and choose only those that can ensure the feasibility of the project’s goals. The main advantage of IEO is trust.
IEOs play a crucial role in Crypto market. IEOs make crowdfunding more secure and reliable. Supporters believe that it is the silver bullet to transform the crypto market completely.
IEO is an active user-base which makes way into a new market place. IEOs provide the following advantages to the crypto market,
- Exchanges carefully examine the IEO projects closely before featuring them on their platform.
- The platform manages the processes of tokenization and token marketing on behalf of the client.
- The project can attract more investors without any regional restrictions because it is backed by the exchange.
Role of Futures Contracts in Crypto Market
Conventionally, when two parties decide to enter into a contract, a document drafted by lawyers outlines all mutually agreed-upon terms and conditions. Once both parties sign this document, it becomes enforceable by law.
Put differently, a futures contract is not written – it is programmed. All of the rules and regulations pertaining to the contract are programmed, meaning that the software will execute each and every action that is specified in the contract. This eliminates the possibility of any miscommunication or misinterpretation. Also, because this code is written on top of the blockchain mechanism, it means that for execution purposes, the code of the contract is decentralized and immutable.
Consequently, Futures contracts are an exceedingly secure method of ensuring that all terms and conditions of a contract are fulfilled. As computer codes, they provide a transparent method of exchanging money, shares, property, or anything of value, leaving no room for conflict, deceit, or a middleman. Furthermore, Futures contracts eliminate the need for an escrow service.
The role of the Futures Contracts is to regulate transactions between accounts and can be used to raise funds when launching an ICO.
They record all terms and conditions in explicit detail. The terms and conditions of futures contracts are fully visible and accessible to all relevant parties.
Futures Contracts run on software code. Hence, they execute transactions very quickly.
They play an important role in the crypto market by recording essential details in each transaction. These details are permanently stored for future records. Also, Futures Contracts eliminate the vast chain of middlemen in the crypto market.
The fact is that the crypto space is still very young, and while it has existed for a full decade now, it has been less than two years since it blew up and attracted the attention of the world. There are still a lot of issues to resolve, and a lot of evolutionary steps until it can reach mainstream adoption.