Buying Bitcoin? Investment Funds Will Be on the Blockchain, Too

Global Stock Markets

Imagine a future where humans play a minimal role in setting up, regulating and reporting regulatory requirements of investment funds, where the process is underpinned by reliable, cutting-edge technology. 

It's a future that's not as far away as you might think, and it's not being built by an existing bank or institution that you will have heard of.
Instead, it is being built by a new group of technical pioneers who were early to blockchain and understood what it meant. These entrepreneurs are now working on a full toolkit that is fast becoming available.

Already, there are distinct innovations emerging across what can best be described as the emerging investment management chain.
Protocols are being built that allow you to:

Bring data securely to the blockchain (e.g. Oraclize). Exchange assets in a secure, peer-to-peer way (decentralized or hybrid exchanges like 0x, Kyber, Oasisdex, etc). Issue all sorts of digital assets on-chain (protocol tokens, ETFs, regulated equities, derivatives, etc). Set up and regulate your investment funds.
 
The goal is to take what today occurs in a few months (and involves a couple of hundred thousand dollars) and replace it with an automated alternative. You get to choose what risk limits your fund has, what fees you want to charge, what pricing source the fund accounting is based on, which assets and exchanges the manager is allowed to interact with and which investors are allowed to invest in your fund. All these rules are written in code and enforced by an unbiased, efficient, transparent technology commonly referred to as blockchain and adhere to blockchain accounting standards.

By following a standard template – any exchange protocols, data feed providers, digital KYC/AML companies or asset issuers can link their product suite to Melon's open-source protocol making it an available option to users.

 
But, we are just beginning, and limitations still exist.

Like many other protocol providers, the first limit is around regulation. There are certain fund laws that are not fit for modern technology. Some of the current laws were simply created in a different time, without consideration of all available technology available. As an example, most funds today must have a custodian and fund administrator by law.

It's just a matter of time before every asset class we know will be digital simply because it is more efficient, transparent and secure. In which case, it’s not too long until we can imagine a fund management world which is entirely run by digital rule-sets and transparent processes.

Crypto funds today are emerging left, right and center in an attempt to gain investment exposure to
this new class of blockchain innovators.

The irony is, that despite all the new technology surfacing, crypto funds can be even more expensive to set up and run than traditional funds. This can be seen in some of the fees they are charging. It is typical to see higher fee structures for crypto funds than traditional asset funds.

The crypto investment funds are likely to be the first to shift, but there’s no doubt that when traditional funds see evidence of how much they can trim their everyday cost basis and pain-points by, they’ll be quick to follow.