The value of blockchain for online investors is pretty obvious (as I mentioned in a previous article). It makes it much easier for investors to choose a trader (because accurate records of all their trading activity is available) and they get more control over their money because they can see how the trader is investing it.
But what about traders? How does blockchain help them to earn more?
Already part of the furniture for cryptotraders
For cryptotraders, the value of blockchain is already obvious - they're using it for daily trades and investments, and they're already convinced of the benefits this technology brings. These benefits include smart contracts, which are the most transparent, conflict-free and fast way to code the contract.
Cryptotraders are early adopters of new technologies in the trading world. They already expect blockchain technology to be incorporated into the platforms they use, and won't have confidence in one that isn't using blockchain.
Benefits beyond the crypto world
But what about other forms of trading? For example, how can blockchain help online traders in FOREX?
To answer this question, we have to focus on the relationship between traders and investors. And the key point to understand is that what benefits investors will benefit traders as well.
Let's home in on three big ways blockchain is a game changer for online traders. And they all revolve around the way it transforms the investor-trader relationship.
- Better transparency and openness: this helps traders attract more investors;
- Smart contracts: these let investors and traders define clearly how funds will be traded, building long term trust;
- Real investment strategies, not copy trading: blockchain lets traders truly develop their reputation within the community, going way beyond simple copy trading.
Let's look into these benefits in more detail.
Attracting more investors with greater transparency
How do you convince someone to hand over their hard-earned money for you to invest? Blockchain is here to help.
Blockchain makes it easier for you to persuade someone to invest with you because you can prove that you won't touch their funds. Whereas previously what happened to their money was in the shadows, now it's out in the open.
As a trader on a blockchain-powered platform like SociumTrade, you can show your investors exactly what's going on with their investment.
- How is your investment strategy performing?
- How much has their money earned?
- How much will you take as a fee for your services?
Blockchain makes it easy to share all this data with them. Best of all, they know all this data is 100% verifiable. In the past, they were left in the dark asking, "what's going on with my funds?" because they didn't know. The best they could hope for was a report at the end of the week. And when the market is volatile, that can cause some serious nerves. But blockchain changes all this.
So what does this mean for traders? Simple. It means more investors. By putting openness at the heart of the trading process, blockchain is bringing investment to a completely new audience - people who previously invested less, or not all tall, because of concerns over how their money was being used.
And more investors means more profit for you.
Keeping investors on board by building trust through smart contracts
Convincing investors to start using your services is great. Keeping them for the long term is even better.
And blockchain can help here too. I've already mentioned the value of smart contracts when trading crypto-assets, but they have other benefits too.
Smart contracts use blockchain technology to automatically execute certain actions, based on predefined conditions. And they have massive implications for the investor-trader relationship.
Using smart contracts, investors and traders can predefine a whole range of criteria:
- Success fees for the trader;
- Stop win / stop lose conditions;
- Asset classes;
- Percentages and much more.
Thanks to blockchain, you can now work with your investors to clearly define what you will and won't do with their money. While this might feel like having your hands tied, in fact it enables you to prove to your investors that you're handling their money the way they want.
The result is investors with greater peace of mind, who will be keen to keep investing with you as their trust grows with every successful trade.
Build your reputation using blockchain (not copy trading)
The popularity of online trading is growing every year, especially in Asia. And the potential is huge - my estimates is there is only about 10% market penetration of all those who could become traders. The SociumTrade platform, based on the blockchain, aims to bring the trading experience and the crypto world to a wider audience.
One thing that's vital for all traders is building a reputation. And this is true whether you have years' of experience or you're just getting started.
Blockchain brings big benefits in terms of build your reputation because it enables you to create a verifiable, unalterable record of all your trading activity. On blockchain-powered trading platforms like SociumTrade, investors get the complete picture of your history as a trader.
How does this help? Well, it means your reputation builds organically with your success. The more you trade, the more you build your credibility within the community. This in turn enables you to attract larger portfolio clients and command higher fees for your services.
And if you're learning the ropes, the social network functions on SociumTrade combined with the transparency of the platform, means you can study and learn from experienced traders.
Avoiding the pitfalls of copy trading
Crucially, blockchain is a much more powerful tool for reputation building than copy trading. Copy trading is a popular mechanism used on social trading platforms where less experienced traders literally copy the trades of more experienced ones. In theory, this is a way to build your reputation as a trader, and for those new to the game to get started. But it doesn't work like that in practice, and at SociumTrade we will be disabling copy trading. Here's why.
If you look at copy trading from a real professional's perspective, it's very strange - why would I want anyone to copy or follow my strategy? If someone copies my trades, the volume will increase and this will have an influence on the market, which means my strategy could be completely ruined. Imagine a few investors like my strategy and they each put 100K on my position. That quickly becomes 10 million, distorts the market and my strategy is dead.
On the SociumTrade platform we have found the right balance between having data accessible but avoiding copy trading. Full records of all traders activities will be available thanks to blockchain, But they won't be available instantly, which avoids the risk of market distorting copy trading.
Becoming a blockchain-powered trader
At SociumTrade, we're building a social trading platform that uses blockchain to add massive value to the online trading experience.
And the unique ability of blockchain technology to make data records open and trustworthy brings 3 huge advantages for traders. The ability to attract more investors through greater transparency, the ability to convert short term investors into long term investors thanks to the trust building blockchain enables, and the ability to build your reputation thanks to detailed records of your trades.
All of which means more long-term investors backing you, and more earnings as a result.