With the recent headlines around digital currencies, the case for improving financial market integrity may never be stronger. To better understand the widening impact of the current phase in the growth of the internet, the Franklin Templeton Institute hosted a webinar from its “Promise of Progress” series featuring Sandy Kaul, Head of Digital Assets and Industry Advisory Services, and Omid Malekan, adjunct professor at Columbia University, focused on Web3. Here are some of my key takeaways:
- Read, write and own is a simplified way to look at the history of the internet. Web1 represents websites where content was read. Web2 turned individuals into content producers. In addition to building a trustless system, Web3 aims to give users property rights and allow them to digitally own unique assets.
- A “trustless system” is a counterintuitive term that really means you can trust a transaction without having to trust any other participant.
- FTX was not a failure of web technology or the blockchain. It was a failure of the leaders of a corporation to be trustworthy with clients’ assets. Web3 reduces the reliance on individuals and allows the possibility of a “trustless system” through decentralized financial (Defi) exchanges.
- In the same week that FTX was collapsing using a centralized system, decentralized exchanges that operate on public blockchains experienced a four-fold increase in volume, likely because they are networks with thousands of independent verifiers who see a synchronized real-time view of every transaction.
- FTX will have a historical impact because it will likely prove a stimulus for better regulation. Market participants who want to see a successful and professional digital asset landscape should welcome regulatory requirements that help reduce counterparty risk.
The technology backbone for Web3 has been built, and the innovation being built on this foundation could open new asset categories. For a more detailed view on the specific implications of the FTX implosion, please look out for an upcoming piece from Sandy Kaul entitled “Evolution and Revolution: FTX Fallout and the Future of Digital Assets.”
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Investments in fast-growing industries like the technology sector (which historically has been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments.
The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. Past performance does not guarantee future results.
IMPORTANT LEGAL INFORMATION
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Issued in the U.S. by Franklin Distributors, LLC, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com – Franklin Distributors, LLC, member FINRA/SIPC, is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.
Please visit www.franklinresources.com to be directed to your local Franklin Templeton website.
Copyright © 2022 Franklin Templeton
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
© Franklin Templeton
Read more commentaries by Franklin Templeton
