DeFi Crypto & Blockchain: Finance of the Future?
<span style="font-weight: 400;">If you ask the internet what DeFi is, Wikipedia will tell you:</span><span style="font-weight: 400;">Decentralized finance (commonly referred to as DeFi) is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments, and instead utilizes smart contracts on blockchains, the most common being Ethereum.</span><span style="font-weight: 400;">And we’re sure that the above definition satisfies all your crypto-questions. </span><i><span style="font-weight: 400;">Just Kidding</span></i><span style="font-weight: 400;">.</span><span style="font-weight: 400;">Let’s talk about money. Not direct deposit money, or printed president money, or gold bars, or buffalo nickels - but the </span><i><span style="font-weight: 400;">first</span></i><span style="font-weight: 400;"> transaction system - bartering.</span><h1><span style="font-weight: 400;">Shekel and Hide</span></h1><span style="font-weight: 400;">Money traditionally has two sides; physical, and representational. The first form of money (as we’re familiar with it today) was the</span><a href="https://theconversation.com/when-and-why-did-people-first-start-using-money-78887" target="_blank" rel="noopener"><span style="font-weight: 400;"> Mesopotamian Shekel </span></a><span style="font-weight: 400;">which was minted around 5000 years ago. Before money, people “paid” with things like shells and livestock but it’s not so easy to transfer a herd of cattle, so coins became a marker to represent the actual wealth that was being used as payment.</span><span style="font-weight: 400;">It all evolved from there. The main lesson we need to take with us from financial history is that </span><i><span style="font-weight: 400;">transaction</span></i><i><span style="font-weight: 400;">convenience</span></i><span style="font-weight: 400;"> is a market driver.</span><h1><span style="font-weight: 400;">NASDAQ</span></h1><span style="font-weight: 400;">The </span><a href="https://www.investopedia.com/articles/07/stock-exchange-history.asp" target="_blank" rel="noopener"><span style="font-weight: 400;">history of the stock</span></a><span style="font-weight: 400;"> exchange is long and complicated. For our purposes, we’re going to fast forward through the Venetians, East India Company, New York, and the intricate details of the S&P 500 Index. Why? Because to understand the viral nature of blockchain, we need to first zoom in on the turning point - when the stock exchange went fully digital.</span><span style="font-weight: 400;">The </span><a href="https://www.investopedia.com/terms/n/nasdaq.asp" target="_blank" rel="noopener"><span style="font-weight: 400;">Nasdaq</span></a><span style="font-weight: 400;">, or National Association of Securities Dealers (NASD) which has evolved into</span><a href="https://www.investopedia.com/terms/f/finra.asp" target="_blank" rel="noopener"><span style="font-weight: 400;">Financial Industry Regulatory Authority</span></a><span style="font-weight: 400;">(FINRA), is not a brick and mortar institution. It is a network system that manages regulated stock transactions.</span><h2><span style="font-weight: 400;">Why Does This Matter?</span></h2><span style="font-weight: 400;">Digital means Global. Taking the necessity of a physical port away from financial trading opened up entirely new pathways for trade between countries and international commodities.</span><span style="font-weight: 400;">Now for the trillion dollar question, </span><b>how does this apply to Crypto?</b><span style="font-weight: 400;">Consider this perspective:</span><b>NASDAQ </b><span style="font-weight: 400;">is to Global access as </span><b>Amazon</b><span style="font-weight: 400;"> is to international shipping.</span><b>CRYPTO </b><span style="font-weight: 400;">is to </span><b>NASDAQ </b><span style="font-weight: 400;">as viral TikToks are to the internet.</span><span style="font-weight: 400;">Amazon doesn’t have hubs everywhere just yet - and neither does NASDAQ, countries such as Afghanistan,Andorra, Belize, Burundi don’t have a stock exchange which means limits to access - in the same way that Amazon does not ship to all countries.</span><span style="font-weight: 400;">Though not 100% legal in every country, Cryptocurrencies are harder to regulate, and are generally more widespread than the reach of traditional or intensely regulated exchanges.</span><img class="aligncenter size-full wp-image-15206" src="https://teckpert.com/wp-content/uploads/2021/08/DeFi.png" alt="DeFi " width="888" height="439" /><em><span style="font-weight: 400;">Legal map of Bitcoin and other cryptocurrencies. Source: Coin.dance</span></em><h2><span style="font-weight: 400;">Blockchain Access</span></h2><span style="font-weight: 400;">Think of Blockchain as a database of hashtags. Each tag, or </span><b>Block</b><span style="font-weight: 400;"> is its own ledger of transactions. Together, each block makes up a network that is duplicated and sent to every system connected to the chain.</span><span style="font-weight: 400;">Blockchain tech can create different types of ledgers; temporary, private, public, permanent, etc. used to store data for particular entities like payments to vendors, or Bitcoin transactions.</span><span style="font-weight: 400;">Cryptocurrencies like Bitcoin run on blockchain technology and can have their own privacy settings that they host using Blockchain (which is a transparent ledger recording database). The biggest bonus to running on Blockchain is the encryption capabilities which provide security to the users and traders of crypto that the individual currency providers may not necessarily implement.</span><h3><span style="font-weight: 400;">How Blockchain Feeds Viral Cryptocurrencies</span></h3><span style="font-weight: 400;">Cryptocurrencies like DogeCoin and</span><a href="https://www.republicworld.com/technology-news/mobile/how-to-buy-ratcoin-know-all-about-the-latest-viral-cryptocurrency.html" target="_blank" rel="noopener"><span style="font-weight: 400;"> Ratcoin</span></a><span style="font-weight: 400;"> are value-tied to their usage, and their usage is tied to hype..</span><span style="font-weight: 400;">Blockchains can be either public or private but for a public blockchain, adding a transaction to the chain is</span><a href="https://www.euromoney.com/learning/blockchain-explained/how-transactions-get-into-the-blockchain" target="_blank" rel="noopener"><span style="font-weight: 400;"> made by consensus.</span></a><span style="font-weight: 400;"> Meaning the majority of the network (chain) has to agree that the Transaction is valid. The people participating in the chain are incentivised to verify transactions through rewards.</span><h2><span style="font-weight: 400;">DeFi</span></h2><a href="https://www.coindesk.com/what-is-defi" target="_blank" rel="noopener"><span style="font-weight: 400;">Decentralized Finance (DeFi)</span></a><span style="font-weight: 400;"> is the encompassing term for apps that facilitate blockchain and cryptocurrencies, though it is heavily linked to the cryptocurrency </span><a href="https://www.coindesk.com/learn/ethereum-101/what-is-ethereum" target="_blank" rel="noopener"><span style="font-weight: 400;">Ethereum</span></a><span style="font-weight: 400;"> which handles direct contracts and transactions - cutting out intermediaries. The goal of DeFi is to take everything in the financial world and decentralize the process by putting it on the blockchain.</span><span style="font-weight: 400;">Financial products decentralized by DeFi include; exchanges, launchpads (IPO equivalent), loans, and staking (savings account equivalent), to name a few. DeFi makes finance more accessible to the general public, all that is needed is a device that connects to the internet.</span><span style="font-weight: 400;">Take property for example, DeFi can take an existing or newly created property, tokenize it, put it on the blockchain, and make it accessible to anyone in the world. It’s essentially decentralized real estate.</span><span style="font-weight: 400;">What’s the big deal with decentralizing everything in the financial world anyways? Well, centralized finance has gatekeepers and limits set to control transaction frequency, trade times, speed, and user access. The biggest caveat to centralized financing is the lack of transparency in the market. This leads to insider trading in the market, along with any other potential misconducts. Blockchain solves this by helping to level the playing field by allowing anyone to access information regarding trades on the decentralized exchanges since blockchain is public by default.</span><span style="font-weight: 400;">Think of DeFi as Blockchain with enhanced adaptation abilities. Blockchain simply supports transparent transactions among a network, DeFi can support more complicated processes like token locks (projects will lock up tokens to drive up value), oracles (reliable data from the real world), liquidity providers, non-fungible token (NFT), supply chain management, options trading, just to name a few.</span><h1><span style="font-weight: 400;">Future Finance</span></h1><span style="font-weight: 400;">Cryptocurrencies are challenging for a lot of people to wrap their mind around because it’s not a simple concept, or a physical representation of currency.</span><span style="font-weight: 400;">Crypto, Blockchain, and their contemporaries are tech-based and while currencies like Bitcoin are stabilizing, there are fringe currencies like DogeCoin, etc. that are highly volatile and depend entirely on popularity (similar to driving up stock commodities through hype).</span><span style="font-weight: 400;">Before we wrap this up, let’s look at some of the possibilities of a Crypto future:</span><ol><li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">Blockchain technology allows banks and institutions to seize this emerging tech and create their own “blockchain token” called the Central Bank Digital Currency (CBDC).</span></li><li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">DeFi projects are targets for hackers which can lead to millions of dollars in losses.</span></li><li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">A more inclusive format for transactions, and with less legal limitations, Crypto/blockchain are appealing for developing countries looking to establish or revitalize their world market appeal.</span></li><li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">Decentralizing cuts out “legacy finance” which can create obstacles for young companies, countries, and financial communities.</span></li><li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">Social Justices gravitate towards the open access attitude of crypto, especially in how it relates to </span><a href="https://cointelegraph.com/news/diversity-and-inclusion-in-blockchain-and-crypto-the-gender-aspect" target="_blank" rel="noopener"><span style="font-weight: 400;">minority groups</span></a><span style="font-weight: 400;">.</span></li></ol><h2><span style="font-weight: 400;">A Digital Barter System</span></h2><span style="font-weight: 400;">There has been a lot of debate on whether or not cryptocurrencies are a digital resurgence of the barter system. DeFi is independent of banking institutions and governments - meaning it’s about as </span><i><span style="font-weight: 400;">democratic</span></i><span style="font-weight: 400;">as you can get when it comes to money by being peer-to-peer (P2P).</span><span style="font-weight: 400;">In networks, P2P represents systems that are directly connected to one another via the internet, and files can be shared without needing a centralized server.</span><span style="font-weight: 400;">This is the concept that crypto embodies, and P2P valuation is at the heart of the barter system. The pro is inclusivity and value independence. The Con is value volatility and hard to stabilize currencies.</span><span style="font-weight: 400;">What do you think about the future of currency? Regardless of your opinion it’s clear that tech and DeFi app development will play a key role. We’re here to help you navigate and build out solutions to the ever-changing landscape. </span><a href="https://teckpert.com" target="_blank" rel="noopener"><span style="font-weight: 400;">Reach out </span></a><span style="font-weight: 400;">to us today to learn how we can help!</span>