The Autonomous Creation and Trading of Financial Assets on the Blockchain
Whereas they are generally considered to be two entirely different technologies, the working principles behind Artificial Intelligence and Blockchain Technology have proven to be highly complementary.
This opens doorways to the development of new applications which require both secure access to data sources, and advanced insights on said data. In this article, we will consider the use-case in which the advantages of Artificial Intelligence and Blockchain are combined to create innovative instruments for the financial industry.
The most widely known application of the Blockchain technology has recently become even more apparent with the price of Bitcoin breaking the magical barrier of $50,000. That is, most people associate the Blockchain technology with the storage of transactional data for so-called cryptocurrencies and security tokens. This stage is often referred to as the Tokenization of assets on the blockchain (Jamiel Sheikh, MIT) 1 .
In a next stage, the Blockchain would allow the trading of a much broader spectrum of financial assets, including native digital assets and highly exotic financial products. These products will be created on the fly by AI-driven algorithms which take into consideration risk, supply and demand, and price forecasts – thereby creating novel revenue streams for the Financial and FinTech industry.
In a final stage, Artificial Intelligence will not only create financial products, but also become an active participant in the market by trading financial assets on the Blockchain. By using the vast amount of data and state-of-the-art computational power, AI-based algorithms can backtest and try an endless number of trading strategies and update their behaviour accordingly – resulting in Ai-based trading strategies to drastically outperform the general market.
The example above indicates that there exist real opportunities to combine the power of Artificial Intelligence and the Blockchain technology in order to create innovative solutions in the Financial Industry. Having expert knowledge in both domains will become a key criterion for financial institutions in order to stay relevant in the near distant, disruptive future.
