How Blockchain Can Become the Financial System the World Needs

The modern financial system generally dates back to the Bretton Woods Accords, which were negotiated in the shadow of World War II. It was a system designed for great power politics to solidify alliances and prevent another world war through shared financial incentives. Since the financial crisis of 2008, and then after 2020, world leaders have called for a second Bretton Woods. But in the blockchain industry, we believe that moment already happened when Satoshi Nakamoto published the Bitcoin white paper in 2008.

If we want to create a new system that funds the unbanked, works across borders, and treats everyone fairly, it has to come from the grassroots. We cannot rely on great power politics in the modern era – businesses and individuals need access to an open system with clearly defined rules and logic that they can understand and trust .

Public blockchains, like Bitcoin and Ethereum, are the world’s first truly fair and open financial system that has proven safe and effective for billions of dollars in transactions in every country in the world. The next phase of this evolution is decentralized finance (DeFi) technology, which reconstructs banking functions such as lending, borrowing, and market making as smart contracts that anyone can use.

Blockchain provides people with exactly the same data, access, and speed no matter where in the world they live. Unlike most online services, which tend to work better the closer you get to Silicon Valley, blockchain technology works exactly the same in San Francisco, California as it does in Kandahar, Afghanistan. Compare that to the old system, where a lack of trust and transparency made transactions costly and slow, requiring a complex network of banks, regulators, law firms, accountants and insurance companies to simply enforce. a record of who owns what. This system was designed around the needs of people with the most money to lose and often excludes the average consumer from the best investments and highest returns.

Blockchains are public ledgers that anyone can use and anyone can trust. Cryptocurrencies that use these public blockchains lead to the creation of an alternative financial system that could be leaner, safer, and more efficient. A system that enables savings, investment, peer-to-peer micropayments and loans, which could one day enable financial inclusiveness for billions of underbanked and unbanked people for the first time. The new system is created by people, for people, and connects our common interests across borders, parties and political systems.

SECURE MONEY IN AN INSECURE WORLD

Two years ago, I met a woman entrepreneur from Afghanistan who explained to me that “having bitcoin was the first time women in my country could own money that the men in their family didn’t know about. “. The idea of ​​untraceable digital gold, in a wallet that she didn’t need anyone’s permission to use, was revolutionary.

A few years later, I met Syrian refugees in London through the charity Refugees at Home. I helped them set up their first bitcoin wallets and warned them that anyone who saw their seed phrase (12 random words used as a private key) could steal their bitcoin.

Thirty seconds later, one of the refugees asked me, “If I gave the seed phrase to my relatives in Syria, would they have access to this bitcoin?” Sure. This is probably the easiest and safest way mankind has ever devised to get money into a war zone.

These are dramatic examples, and probably not very relevant to most readers of this article, but DeFi also has a lot to offer wealthy nations (and wealthy people). Better interest rates, faster stock clearing and settlement, access to high-rise investments for non-accredited investors, greater transparency and clear rules can benefit everyone. For example, you can deposit $10,000 into a traditional bank savings account and earn a paltry 0.01% interest, while the bank lends your money and earns maybe 5% or 6% interest on everything. , from car loans to mortgages. In DeFi, the smart contract only takes a tiny fraction of the interest, allowing capital providers (like you) to capture almost all of the gains, which can be hundreds of times the current yield of an account. traditional savings.

THE PATH TO FOLLOW

Blockchains and DeFi technology have the power to transform lives, but there is still a long way to go for the industry. Today’s blockchain user experience is confusing and intimidating, and there are a variety of pitfalls new users can fall into. Casual users often lose their keys, expose their private keys to hackers, or end up sending tokens to fraudulent projects. To overcome these obstacles, we need industry leaders to integrate these revolutionary new technologies into proven applications that users already understand. Existing apps can integrate curated lists of approved projects, manage key security, and manage password resets. Once we solve these usability barriers, we can connect billions more people around the world to financial opportunities they never had before.


Marc Blinder, Founder and CEO of AIKON and main contributor to Blockchain ORE.


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Don F. Davis