The legacy banking system compared to decentralized banking on the blockchain.

2개월 전

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The global banking and financial system has created massive wealth, but its highly centralized, so the majority of the wealth goes to a minority of the world’s population and large barriers exist to participation including wealth and both financial and social infrastructure. This worldwide inequality of opportunity could be solved by improving accessibility to the tools of wealth via the blockchain and cryptocurrency. The internet presents a possible pathway to the equality of financial opportunities due to it’s increasingly widespread nature. This belief is based on these estimates of internet usage: a. Internet: 3.9 billion users by the end of 2018, b. Two-thirds of the world’s population with no primary banking relationship, the so called “unbanked” have mobile phones, c. over 2 billion people already use online banking services and the majority of the world’s population have heard of Bitcoin and the Blockchain: the emergence of new public blockchains.

Once new developing technology, which has been created at the point where technology and financial systems merge is decentralized finance. This has been defined many ways, but I like to define it as the place where the newest internet technology called the blockchain and the newest store of value called cryptocurrency merge with traditional financial and banking systems to allow access to the world’s population to the tools of wealth creation which are currently only accessible to the rich and well connected. That’s a big concept, but basically it means if your smart enough to figure out the tools of wealth currently used only by the rich and well connected, decentralized finance allows you to use the same tools, but in a different arena called decentralized blockchain finance.

There are six characteristics of public blockchains that distinguish them from the private networks used by governments and traditional financial institutions:

• Permissionless: Anyone in the world can connect to the network
• Decentralized: Records are kept simultaneously across thousands of computers
• Trustless: A central party isn’t required to ensure transactions are valid
• Transparent: All transactions are publicly auditable
• Censorship Resistant: A central party cannot invalidate user transactions
• Programmable: Developers can program business logic into low-cost financial services
Source

This is important for five main reasons and Frank Cardona said it best in his article link

  1. Wider Global Access to Financial Services: With decentralized finance, anyone with an internet connection and a smartphone could access financial services.
  2. Affordable Cross-Border Payments: Decentralized finance removes costly intermediaries to make remittance services more affordable for the global population.
  3. Improved Privacy and Security: In decentralized finance, users have custody of their wealth and can transact securely without validation from a central party. Meanwhile, in the current system, custodial institutions put people’s wealth and information at risk if they fail to secure it.
  4. Censorship-Resistant Transactions: In a decentralized financial system, transactions and blockchains can’t be shut down or falsified by central institutions like governments, central banks, or big corporations.
  5. Easy to Use: Plug and play apps will allow people to intuitively use decentralized financial services without the complexity of the centralized system.

The future of finance on public blockchains is already at work on the Ethereum blockchain, the Tron blockchain and the Steemit blockchain in different levels and different examples. The Steem blockchain uses three cryptocurrencies and two smart contracts, which are tools of wealth creation accessible to the majority of the world’s population worldwide. The TRON blockchain offers several money-making opportunities and a credit debt facility called JUST. The Ethereum blockchain offers the MakerDao, a credit debt facility and other interest-earning cryptocurrency staking opportunities. We are in the early stages of decentralized finance development, so it is an open field where anyone can start learning and get involved. The future is occurring all around us, we need to be informed so we can profit and hopefully reach our individual goals of financial independence. Which is the ultimate form of freedom.

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References:
https://www.visualcapitalist.com/decentralized-finance/

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This post covers some very important areas