Tuesday, October 26, 2021
HomeIndustry TalkHow Convergence Finance Is Revolutionizing Private Investment Markets

How Convergence Finance Is Revolutionizing Private Investment Markets

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There are numerous ways to enhance the appeal of blockchain technology and decentralized finance. Bridging the gap to the real world and its available liquidity remains a worthwhile option. Convergence tackles this aspect by attempting to revamp the concept of private investment markets.

The Power of Real-World Investments

Even though one may think that decentralized finance will replace the traditional economic system one day, that may not necessarily happen right away. In fact, it may prove more beneficial to bridge the gap between the two industries and create more encompassing, appealing, and robust financial products and services.

Bringing the liquidity of real-world assets to decentralized finance is an approach well worth exploring. As there is plenty of liquidity in the real world – and not always as much in DeFi – it is often better to combine the best of both worlds and see what can be achieved. Decentralized finance currently caters to cryptocurrency users primarily, yet those who don’t know these assets have a tough time exploring the options at their disposal.

Introducing support for real-world assets can enhance the overall DeFi liquidity. More users will be able to enter this compelling industry to contribute liquidity to protocols and services. Tokenization will be an essential step toward helping asset owners receive more funding. Digital ownership of assets can unlock benefits, including automated issuance and zero settlement times.

A Big Shift For Private Investment Markets

One industry that can benefit tremendously from the introduction of real-world assets is the private investment markets. Even though these markets tend to be successful, they are only accessible by a select few people. These investments often entail equity and debt or privately-owned companies. For investors, the goal is to increase a company’s value and sell their stake later on for a profit.

Even so, these markets have a few potential drawbacks to consider. A private market has a significant illiquidity risk, as private equity investments are long–term plays for up to ten years. Moreover, it can take a few years until a company can realize anything, despite asking for more capital. It creates a hurdle for lesser experienced investors as a complex asset class, although it doesn’t necessarily have to be.

Convergence, the decentralized interchangeable asset protocol, can prove a viable partner for private investments. As everything can be tokenized and even fractionalized, companies can resolve the illiquidity aspect by making these markets more accessible to as many people as possible. As investors can own a fraction of these real-world assets, there will be a much bigger market to explore.

Additionally, COnvergence provides a solution for asset owners to access greater price discovery. Owners can put all tokenized assets in a liquidity pool on the native trading platform ConvX, making them accessible to any DeFi user in existence today or in the future. Doing so allows anyone to invest to achieve private exotic asset exposure tokenized and fractionalized through Convergence.

Closing Thoughts

The appeal of private investment markets can increase significantly when pairing it with liquidity in decentralized finance. Providing all DeFi enthusiasts with an option to gain private exotic asset exposure is a considerable step in the right direction. Although no one can predict the overall demand for these products, it remains essential to explore all options in the broader financial industry.

By making these investment options more appealing to everyone through tokenization and fractionalization, users can explore new use cases and liquidity for some time to come. Convergence is bringing something entirely new to the table, as there is no other provider exploring this option for private exotic asset exposure.

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