Some investors are bold enough to go into uncharted waters of super early stage startups. Others are staid and wait until a business goes public and even then may not invest directly in any one stock, but only in mutual funds run by professional investors. In any of these cases, interested parties are swapping one thing for another, such as an investment (money later) for a price (money now).


The swap is a primary function of any market, and it is also true for capital markets.


Counter parties can swap contracts for physical things such as copper or wine, and they can do so digitally so they're not actually taking delivery of those items, but are doing so virtually using the agreements to buy/sell as tokens instead.


And extending the idea to virtual trading of commodities via contracts, derivates are contracts for specific conditions being true, for instance a bet that a loan performs a certain way, or a bet on the price of oil. These digital contracts representing the bets can also be traded prior to their expiry.

Stock Exchanges

A particular type of pass-through derivative is the share of stock in a business, which represents a portion of the business itself. These can also be traded on live marketplaces, and the prices are determined by buyers and sellers based on their expectation of future earnings of the businesses whose shares they're trading.

Wall Street

And Wall Street of course being the home of all the big exchanges and capital markets in the world, along with Singapore, London, Hong Kong, and EU markets also playing roles in the global economy.


So these basic processes are what make the capital world tick, from facilitating business transactions in the first place, to facilitating banking, to facilitating growth finance. Mergers and acquisitions of businesses, which is equivalent of buying up all outstanding shares of a business, are also part of the overall landscape of growth.
The big eat the small, usually, but in the new Internet universe, as we will see, it is the nimble and the technologically superior that beat others. It is a game of David 2.0, and this time the nerds are winning.

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