CONTRIBUTORS
David Alderman
Research Analyst,
Franklin Templeton Digital Assets
Preview
A version of this article was first published on November 7, 2023 by Benzinga.
In today’s world, many have perceived crypto as having limited fundamental value and often being driven purely by speculation. While the speculative nature of crypto is undeniable, that speculation is built on a foundation of technology that is a significant leap forward in innovation. The innovation of crypto is best summed up as crypto reduces the cost of trust. In the traditional financial system, any transaction between two parties involves many trusted intermediaries; however, using crypto rails, there are significantly less parties involved in processing a transaction.
The key to eliminating these trusted intermediaries involves sharing a ledger that can be trusted by all parties involved. Enter decentralization. Shared ledgers among different parties are not capable of being fully trusted without sufficient decentralization.
As intermediaries are eliminated from economic activity, substantial economic savings are realized for all remaining participants involved in the process. Less middlemen means less mouths to feed, and improved cost efficiencies. Additionally, the fewer involved parties inherently result in decreased counterparty risks.
In stark contrast, centralized systems, by their very definition, bear inherent weaknesses, such as single points of failure and centralized control. This makes them susceptible to various issues, including corruption, inefficiencies, and mismanagement. It’s important to acknowledge these vulnerabilities when contrasting centralized systems with decentralized blockchain technology.
WHAT ARE THE RISKS?
All investments involve risk, including loss of principal.
There are risks associated with the issuance, redemption, transfer, custody, and record keeping of shares maintained and recorded primarily on a blockchain. For example, shares that are issued using blockchain technology would be subject to risks, including the following: blockchain is a rapidly-evolving regulatory landscape, which might result in security, privacy or other regulatory concerns that could require changes to the way transactions in the shares are recorded. The fund’s yield may be affected by changes in interest rates and changes in credit ratings. These and other risks are discussed in the fund’s prospectus.
Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. To obtain a summary prospectus and/or prospectus, which contains this and other information, talk to your financial professional, call us at (800) DIAL BEN/342-5236 or visit franklintempleton.com. Please carefully read a prospectus before you invest or send money.