Blockchain and Crypto: Looking Back
Origins and Philosophy
Blinded by the pursuit of profit, there are consumers and enthusiasts alike that have forgotten the core philosophy and true potential that cryptocurrencies, and the underlying technology blockchain, have to offer.
Not long after the 2008 global economic crisis, the first cryptocurrency Bitcoin was released as a response to the breach of trust between the public and the various financial institutions that should serve to protect the public’s interests.
Embedded in the genesis block of Bitcoin includes the headline quote “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Since then, the embracement of cryptocurrencies has led to the development and operation of various global decentralized networks utilizing blockchain tech; providing much-needed trust-less alternatives to the flawed systems of finance the public has, up until this point, been forced to rely upon.
There is no doubt still a long way to go, but in addition to being an exciting new technology, blockchain and cryptocurrency are proving to be a powerful social, political and cultural movement; allowing us to imagine money, banking, and payments in new ways.
If implemented in good faith, blockchain tech could prove to be a broader force for transparency and integrity in society.
Problems in the World of Finance
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust,” — Satoshi Nakamoto, creator(s) of Bitcoin.
While all individuals might not understand the technical side of blockchain, it’s crucial as many as possible at least understand why there’s a necessity for widespread implementation of blockchain throughout industries it has the potential to transform.
This is especially important when it comes to working towards the transformation of our financial systems. Without informed users, we run the risk of the flawed implementation of blockchain platforms by malicious actors that will only repackage our old systems as something new.
The current financial system we entrust to manage our capital can be described as antiquated, inefficient, and rife with corruption. In the modern global economy, there are billions of people participating with trillions of dollars changing hands every day.
However, there are also billions of people who lack access to basic financial tools. Now more than ever trust, efficiency, and scalability are vital for any platform to function effectively.
Almost as important as the management of capital, is the management of data. Unfortunately, numerous platforms and institutions have shown an inability to properly manage and secure user data.
Data vulnerability can typically be tied to reliance on outdated tech and the centralization of data; creating an environment where systems failures and cyber-attacks are a common occurrence.
Whether it be the management of capital or data, there has been a proven inability to properly regulate either in our current systems.
The Blockchain Solution
Utilized correctly, blockchain technology can push us into a new era; one of openness, decentralization, and global inclusion. By leveraging a global peer-to-peer network, blockchain platforms can ensure the integrity of both the exchange of value and management of data, without the reliance on a third party.
This will allow opportunities for businesses to streamline operations and reduce both transaction costs and risk. Because blockchain is distributed and decentralized, platforms can operate openly and with no barriers that would otherwise exclude participants.
Additionally, these blockchains are immutable; providing an extremely low probability for the manipulation of data that could otherwise be used to facilitate financial crimes. This is an especially important feature for regulators as it should drastically reduce both the cost and labor required to properly audit and regulate all areas of finance.
Aside from cryptocurrencies, blockchain globally distributed ledgers are capable of recording anything of value; whether that be money, bonds, titles, contracts, equities, or any other asset that can be digitized. This is possible because trust is established through the use of cryptography and network consensus, not by intermediaries such as banks and governments.
As promising as they are, blockchain platforms are not an overnight solution to the problems faced. Transitioning will likely be both costly and messy but in the long run critical to economic vitality and progress.
Responsibility of Due-Diligence
Over the last few years, there has been an overwhelming amount of hype surrounding blockchain and cryptocurrencies. Countless projects have emerged promising to solve an array of problems without providing a clear roadmap in how. There are also projects which unnecessarily implement blockchain in areas of interest where other existing technologies would have otherwise sufficed.
As the blockchain and crypto space continues to develop, individuals need to do their due diligence. The implementation of blockchain should not be a goal in itself, but rather a tool to achieve a specific purpose.
Decentralized Finance
Up until recently, cryptocurrencies had a lack of use cases beyond price speculation; where the majority of crypto users would purchase and hold their cryptocurrency for the sole purpose of selling it at a higher price than they bought it for. As the blockchain and crypto industry has evolved, so has the opportunity for use.
Decentralized Finance (DeFi) is an emerging financial technology based on secure distributed ledgers, similar to those used by cryptocurrencies, and provides financial services to its users. As DeFi developes, it’s proving to be a legitimate alternative to relying on centralized financial institutions such as banks, exchanges, and even insurance companies.
The rise of DeFi has provided a much-needed utility for cryptocurrency use. Instead of solely relying on the appreciation of the value of one’s cryptocurrency, users can now actively use, or invest, their cryptocurrency with DeFi platforms.
MakerDAO is one such DeFi platform. A peer-to-peer organization created on the Ethereum network, MakerDAO allows people to lend and borrow cryptocurrencies. The process of lending and borrowing on the platform is controlled and governed by smart contracts.
Hyperdex is another DeFi platform. Hyperdex is an all-in-on DeFi investment platform that simplifies the process of investing in DeFi; providing users the ability to make active use of their cryptocurrency through investment opportunities in the forms of ‘cubes’. Users are able to pick and choose from a variety of cubes to find the one that best fits their investment needs. Cubes effectively simplify the investment process for users and enable them to capture the newly generated value within DeFi, with or without prior knowledge. To invest in a Cube, users directly deposit crypto assets and then receive a return based on the specific Cube’s terms and strategy.
DeFi also has automated market makers, such as Uniswap. The Uniswap protocol is a type of decentralized exchange that offers various pairs of tokens to trade. Prices are set using mathematical formulas, and trades occur using smart contracts. As a decentralized exchange, there’s no third party involved and no registration required. You just connect a crypto wallet to Uniswap’s app, and you can trade cryptocurrencies.
As exciting as the DeFi industry currently is, it’s still in its early stages of development with a lot of room for growth and innovation.
Going Forward
At the end of 2021, the number of cryptocurrency users nearly reached 300 million people across the world, and could even reach 1 billion by the end of 2022. From the marginalized to the powerful, a systemic and inclusive approach to blockchain technology will help ensure that everyone benefits from its development.
As the blockchain and crypto industry continues to develop, the extent to which it grows will depend substantially upon community engagement, not spectatorship, to help guide it in the right direction; ensuring policymakers and/or malicious actors do not hinder its growth.
Blockchain and crypto have inspired a new generation of entrepreneurs and innovators. The previous generation worked to bring us the internet of information, it is our time now to bring the world the internet of value.
