The concept of smart money is quite broad. In this article, we will look at the traditional meaning of smart money, its characteristics, the concept of smart money from a blockchain perspective, and the prospects and challenges of smart money and blockchain integration.

Smart Money as Investment Signal

Traditionally, smart money is funds or capital controlled by experienced and well-informed investment professionals. These entities have a strong command of the market and make strategic investment decisions to that effect. Platforms like Nansen are used to utilize various market trends and get insights into where large capital is moving within the crypto ecosystem.

Characteristics of Smart Money as an Investment Signal

Here are the basic characteristics of the traditional smart money:

Bulk Transactions

Smart money investors make bulk and strategic investments in companies due to speculations that they would perform well and yield beautifully.

High Speculation Sense

Smart money investors often invest in businesses and industries that are highly prolific and are expected to have a rise in potential growth.

Insider Buying

Smart money investors are often company executives since they would have enough information on their respective companies. It is also a sign of confidence in the company’s potential prospects.

Fundamental Analysis

Smart money investors often conduct in-depth fundamental analyses to enable them to make smart investment decisions.

Smart Money as Customizable Payment…

Fundamentally, smart money follows the idea of “restricted-use money” which can be used only for what it is specified. This includes casino-issued propriety chips that can only be used for gambling and government-issued food stamps for purchasing food in designated outlets.

Narrowing this down to blockchain, according to Smart Money: Blockchain-based Customizable Payment published by Copenhagen Business School, “smart money is a value exchange instrument that is based on computer protocols which facilitate, verify, or enforce preset conditions for its appropriation as payment, e.g. who may use the money, what products and services can be bought, and where”. Smart money can be used by individuals, societies, governments, organizations, etc to manage the appropriation of money and its use as a customizable medium of exchange.

Practically…

Assume that Ashraf, a student of the University of Lagos, is a serial spendthrift, and this fact is known to his parent who knows Ashraf could spend any money with him on expensive apparel. So, if his parent wants to send his tuition fee to him, they can decide to control how it is being used.

The money would be reflected in his account and show visually what the money is for upon receipt but it can not be used for anything but to pay his tuition fee in the school coffers. This would be used to protect the fund against Ashraf’s dangerous spending habits.

Merits of Blockchain-Integrated Smart Money Solutions

The following are the inherent benefits of blockchain-integrated smart money solutions:

Programmably-Smart

Blockchain smart contracts are programmed to handle complex financial transactions and processes. This helps in saving time and achieving perfection in the transactions.

Very Secured

Blockchain-integrated smart money solutions help provide a secure and strong security system for storing and managing financial assets. This helps in reducing the risk of theft and fraud.

Transparency

Blockchain provides a transparent and immutable record for all financial transactions, thereby, promoting accountability and reducing the risk of technical errors.

Accessibility

Blockchain-integrated smart money solutions are accessible to anyone as long as they have internet access. Access to this solution is not limited by race, location, or financial status.

Efficiency

Blockchain-integrated smart money solutions eliminate the need for paperwork thus leading to improved efficiency.

To conclude…

Despite the potential to revolutionize the financial industry (and it is still revolutionizing!), the smart money industry is not devoid of its shortcomings. These shortcomings include scalability, rough regulatory terrain, and code security vulnerability. The world is yet to see the full potential of this fine innovation.