Cryptocurrency is still in its infancy stage, with the entirety of the exchange valued at about 900 billion. This does not even come close to the valuation of popular US stock exchanges, even less so, as giant tech companies such as Amazon and Apple both have individual valuations that are larger than the crypto environment.
Even still, it is the fastest-growing finance community, as the few years it has been on the market has attracted intelligent and interested parties in learning the ins and outs of coins that could allow them another way to access the financial system without needing to go through the traditional obstacles of securing information, financing and a store of value from things such as banks.
Investor sentiment is bleaker than ever, as the fiduciary bailout of the 2008-2009 crisis and current interest rate conditions have negatively impacted the American outlook and trust in both their financial system and government decisions.
Why Do DeFi and Crypto Get a Bad Rap?
A name such as DeFi (short for decentralized finance) has a key buzzword you may notice. “Decentralized” is not exactly a word that the government or regulatory bodies like to hear, as things they cannot control are outside their sphere of influence – causing risk and panic as to what the future holds. Banks love the safety of hedging risk, so some even go as far as to completely ban cryptocurrency trading within their platform.
Decentralized finance also brings with it risks on a global scale for criminal proceeds, as anti-money laundering efforts may be more difficult to conduct on a decentralized and unregulated market.
Nefarious actors with dark intentions could take advantage of this opportunity to use the speed of a blockchain network in order to more easily integrate their criminal proceeds within society. This is usually met with a degree of skepticism, some arguing that limiting human and technological advancement because of risk of harm is in itself a risk of stagnation – which can be equally, if not more detrimental to society.
How Can a DeFi System be Used for Good?
Decentralized finance is already shaping the world in many different ways. Being away from the public eye and having a system of record that is extremely difficult to forge or break into has already proven very useful.
Here are 3 ways that DeFi can shape the future of the financial system in human society:
- Storage of value for the ordinary person
- Swift global community of fundraising
- Indestructible records
Storage of Value
The traditional financial system works through the federal reserve and banks, creating a flow of money with the fiat currency available and deciding such things as approving lending for housing, funding business start-ups, and setting interest rates on something we all have in our wallets: credit cards.
While the financial system is after compensation instead of education, cryptocurrency, the blockchain, and DeFi, in general, have been in front of investor enlightenment and offering a point of a sale transaction system that is quicker and works on a “by the people, for the people basis”. Optimists hope that crypto will be a storage of value when fiat currency inevitably reaches hyperinflation.
Community Fundraising
Both for philanthropic and relief efforts, the speed with which cryptocurrency can transfer from wallets far exceeds that of traditional methods. Examples include the Ukraine war relief effort and donations for COVID-19 support.
This has brought together the decentralized autonomous organization (DAO) which was founded during the large COVID wave in India by Sandeep Nailwal, Co-founder of Polygon Technologies, when he observed the inaction of government support. The most notable donation was made by Vitalik Buterin (co-founder of Ethereum) of over 1 billion dollars in SHIB.
Meaningful Records
Utilizing blockchain technology when transitioning to the Web 3.0 stage will create immutable and unmolested records and will stand the test of time. The world is looking at The Staling Lab, which is the founder of Project Dokaz, using this technology to document war crimes in the current Ukraine crisis. Records are created from meaningful metadata and time-stamped to ensure validity and proof of record.
Source: https://money.usnews.com/investing/articles/how-cryptocurrency-and-defi-can-do-good-in-the-world
