You may remember visiting a stock broker with your parents as a child. The ground-floor office had large glass windows that gave out onto the street. The black lettering on the windows had gold edges that sparkled when the sun hit them.

Inside, a nice secretary sat at her desk. Sometimes you waited on comfortable chairs for a few moments. Then, she called your parent’s name and walked to the big door to let you into the inner sanctum – the broker’s office. Lots of matching dark wooden furniture that smelled of furniture polish. Leather chairs. And soon, the broker and your parents were talking about your father’s bonus and about putting money here and moving money there. They mentioned familiar names, like those of your utility company, favorite soup and baby powder.

Compare that with how young couples might make investments today.

How technology has changed investing

While it feels as if the investment world has changed overnight, it has actually taken a series of steps. First, shareholders stopped receiving paper stock certificates. Then, the pink slips stopped arriving in the mail to confirm trades their brokers had made from their accounts. Instead, trades were reported by email, and investors started having 24/7 access to their accounts through their computers.

In parallel, on the stock-trading side, traders went from having to be on the stock exchange floor yelling buy and sell orders to being able to enter trades from their desks. Electronic trading meant faster order execution and, eventually, high-frequency trading. Digitization was introduced in the late 1980s to ensure that the human element couldn’t get in the way of clients wanting to place timely orders.

Computers and platforms continued to make it easier for people to trade and to lower the cost of transactions. New behind-the-scenes technologies removed intermediaries and costs – and robo-advisors went from low-cost to free investment guidance and services.

The world of cryptos and Robinhood

Technology also made the recent GameStop/Robinhood story possible. In short, it gave direct trading power to individuals who, through the convenient social media platform Reddit, used their collective buying power to gang up on Wall Street. The generation that is so comfortable with the concept of cryptocurrencies – digital forms of what used to be paper money – can see that a share that once had a paper stock certificate attached to it is today nothing but a digital store of value.

Uncomfortable change

Any innovation feels somewhat unbelievable when you first experience it. You may remember the first time you got money out of a machine embedded in a bank wall instead of from a teller. Or when you paid a bill with the piece of plastic your bank sent you. Or when your broker offered you a composite of all shares in a category – an ETF – instead of investing in one company at a time.

Bitcoin and blockchain are no different. Bitcoin is one of the cryptocurrencies – digital forms of money that function without a government or bank. They trade on online exchanges and are seen as investment assets. They offer capital appreciation and – in these volatile times – a possible inflation hedge.

Yet, although they arrived on the scene in 2009, there is still resistance to the concept.

Behind bitcoin (and other such currencies) is blockchain, another technological advance that needs more integration and acceptance. Here is a “simple” description:

It is a time-stamped series of unchangeable data records managed by a cluster of computers that no single entity owns. Each “block” of data is secured and linked to each other through cryptographic principles, or “chains.” When you use bitcoin to buy something, the transaction is recorded on a blockchain (a digital ledger or database) whose entries cannot be erased or changed.

Whether you decide to jump into such investments feet first or sit on the sidelines for a while depends on three things: your risk profile, whether you’re an earlier adopter of technologies and whether you have an expert support structure to help you make the best decisions.

NFTs: the latest enigma

The most recent hard-to-absorb technological advance is an “emerging store of value” called an NFT: a non-fungible token. An NFT is like a digital signature. It uses blockchain to program and record a digital asset’s specific identifiers, transactions and custody. An asset is “tokenized” by assigning it a unique string of code, which is then saved on a decentralized blockchain ledger. The ownership of the asset becomes something that can be bought or sold with confidence.

Concert tickets have been used to explain the idea. All concert tickets may look the same, but the barcode on the ticket is what records information specific to you, to the date of the event and the venue. The code (or token) put on an asset works the same way, identifying it in a way that cannot be corrupted.

So how can that technology be useful?

For years, investors have stored value in art, jewels, precious metals, land and other tangible assets. A private bank may allow a lender to collateralize a loan with fine art, for example. Transferring the physical asset and proving its provenance can become complicated. (Wikipedia defines “provenance” as the chronology of the ownership, custody or location of an object.)

An NFT is a perfect solution to that problem. It contains a unique digital serial number that certifies the object’s authenticity and ownership history. The ownership of an asset can be transferred digitally without removing it from the network where it resides. (Ethereum is one of the most commonly used networks today.)

The NFT isn’t the actual property. Instead, it points to the location of the asset off of the blockchain. With time, more and more applications of this technology will appear, and the concept will become more familiar.

Today’s NFT frenzy

So many new technologies find unexpected applications. NFTs have captured the imagination of artists, who have gone on to auction their work with extraordinary results. Digital artist Mike Winkelmann, known as Beeple, created an NFT of his digital montage “Everydays” that Christie’s auctioned for $69 million. A unique NFT for a GIF of Nyan Cat sold for $560,000. A designer of 3D furniture renderings used NFTs to verify his designs and sold 10 of them on an online auction for $450,000 in total.

CEO of Twitter, Jack Dorsey, sold his very first tweet as an NFT for $2.9 million. A LeBron James “moment” on a video NFT went for $208,000. Iowa center Luke Garza made an NFT of a montage of artwork from his college basketball career and auctioned it off for charity.

The collectible nature of NFTs appeals to many people. And for those who came of age with computers, art is less something that hangs on walls than something that can be shared digitally. The question is whether an NFT can hold millions of dollars of value over the years. Is this a case of tech-world opportunism or just a bubble that is part of the growing pains of a new technology?

The importance of alternative investments

NFTs may be a fad. Or they may underpin highly profitable future investments. In either case, massive investments are being made, and more robust platforms are being built to increase alternative investments’ transparency and comfort.

Investing changed when trading was digitized by making the analog-to-digital leap. Digitalization takes things one step further, using digital technologies to change business models. Consider what Netflix did to Blockbuster, what Airbnb did to the hotel industry and what Lyft and Uber did to traditional taxi service.

Every industry is expected to be digitalized by blockchain. Digitalized assets may seem foreign now, but they’re here to stay. Bitcoin may be the equivalent of the Dutch tulip mania of the 1600s; or, it may not.

This article originally appeared in Old Colony Memorial.

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