Finance

The Power of Data: Using Blockchain Analysis To Drive Cryptocurrency Investments

February 20, 2023

Too many investors nowadays are looking forward to making a social and environmental impact and reaping good financial rewards. The Global Impact Investing Network conducted an Impact Investment Survey in 2018, where the respondents invested around $35.5 Billion in about 11,136 transactions in the previous year. The main driving factors behind the investment growth were the lack or too much availability of reliable data on the environmental or social outcomes of an investment, creating difficulty in credible accounting.

The hardships surrounding the impact attribution also impacted allocations for cryptocurrency investments, often risking the double counting present in claims. The blocks in monetizing impacts, i.e., impact markets that are illiquid, uncertainty in returns, and higher costs of transactions. With the help of the right Blockchain analysis system, you can easily examine the documented information on distributed ledgers and blockchains.

Such solutions are handy for providing tools for an investigative approach with entities and transactions that interact within a blockchain. Users can easily do searches for certain events, monitor anything unusual, and also visually represent blockchain data. The system is also handy in enhancing fraud protection, non-compliance, and misuse.

Are Blockchain-Dependent Solutions The Answer To Issues?

Source: bigdataanalyticsnews.com

Blockchain technology can currently revolutionize the storage, transfer, and management of the values present between digital identities in various economic sectors. The blockchain-specific tokens crowdfund new business ideas, enhance transaction-dependent business processes, and also serve as value stores.

Recently the Blockchain made its way into the community of impact investment, and a lot of cases are made to avail benefits of its features, providing a rise in a new application category referred to as “impact tokens.” All these tokens present a Sustainable Development Goal-related impact of the UN, generally in a unit-based quantified measurement metric linked to the origin (an activity that made it, representing its identity). Such tokens are useful for making performance-specific payments, impact tracking through substantiated claims, and supply chains supporting the SDGs.

Blockchain Case For Impact Investing

Source: givingcompass.org

Asset management on the Blockchain has many benefits, from which the impact investment can potentially benefit: improved traceability, higher security, swift transactions, low costs, and higher output. Such features add great value when it comes to impact investing:

Trust: Most impact-causing investments are in developing countries with low institutional capacity with a low-trust environment. Using blockchain networks can mitigate the requirement of trust because of its in-built trust-generating features, which lessens reputational risk exposure from any unverified claims. Blockchains also help in the automation and acceleration of measurement of impact and verification, which, by using the present-day processes and models, makes it costly and slow. At higher reliability and speed, the impact creation is set as a standard performance-driven dashboard parameter to manage the impact investments.

Attribution: The impact tokens are used for tracking the investment impact (i.e., in sustainable production) with the help of a supply chain. They are passed along – i.e., product buyers for a sustainably made product – and assist impact investors to avail the financial value through the creation of impact.

Monetization Of Impact

Source:facebook.com

The impact of monetization is accelerated, and the removal of transaction costs is possible. The high-trust impact tokens, especially the ones measured on a unit basis, also lend them as a design metric of the result-oriented finance schemes. Monetizing such tokens also becomes instant or rapid while creating a strong behavioral incentive on the level of implementation: immediate rewards are effective in influencing behavior. Such low transaction costs can also make things possible to facilitate transfers for individuals limiting the requirements of middlemen.

Therefore, it isn’t any surprise that the substantial impact token numbers are there in the market within the previous year. While such tokens are different in design and purpose, most of them can claim to represent a quantified unit of impact related to one (or more) SDGs. Some tokens are available to the interested public through Initial Coin Offerings (ICOs) as a means of funding a) the activities originating claimed impact and b) the team driving blockchain development platforms managing tokens.

Due Diligence Requirement

All recent hype around ICOs and new tokens as a means of raising blockchain project funds brought charlatans with fraudulent intentions onto the scene as an outcome, increased criticism and scrutiny of the blockchain-specific solutions.

The need for security can also be applied to impact tokens. It would be vital to create and apply the criteria allowing investors to assess impact token integrity and the ability to channel funds for enabling the outcomes of the desired impact.

It Adds Up Value On Accounted Impact

One key aspect of Blockchain technology is that it can automate creating and managing data through a decentralized approach. Having a well-designed impact token is based on data acquisition models and verification, free from any judgment or human intervention.

The feature is also useful for making significant contributions to the operation and design of report and verification systems for greenhouse gas (GHG), such as the Paris Agreement, and implementing market-dependent approaches, which are explored well by the UN organizations. In 2017, to support the efforts, many bodies, including the UNFCCC Secretariat, also made a ClimaticChainCoalition.

Higher Trust Factor Between The Stakeholders And Users

Source: itweb.co.za

With successful blockchain projects, users gain more trust as they’re designed in the form of collaborative projects with higher levels of decentralized consensus makers and transparency. They offer rewards to the project contributors and the ones who protect their integrity. They deliver success due to the wide buy-in and community support from stakeholders and users.

It Is Open Source And Transparent

The large community of impact investment is within the context of the wide stakeholder base. It has to be accessible to all and must be responsive according to the public interest. As an outcome, all Blockchain applicable for managing impact tokens needs to depend on open source codes that are freely accessible.

Summary

Blockchain analysis has some overlap within the category of Blockchain identity. Both solution types are handy for evaluating the risks related to a certain entity or identity. While the blockchain analysis features don’t have the same identity scopes as management features, their functionality includes vital features to ensure perfection in data modeling and transaction analysis. Thus the aforementioned information suggests that blockchain analysis significantly impacts cryptocurrency investments, and with the right blockchain analysis system, you can always be ahead of the curve.

Leave a Reply

Your email address will not be published. Required fields are marked *

35  −  31  =