We are not taught real economics at school. Instead, we learn voodoo economics. For example, rarely – if ever – do professors present us with valuable insights that have been highlighted by the Austrian School of Economics.
Individuals must therefore break their conditions in order to understand how the financial world works. The truth about how the financial system was built, how it works, who controls it and so on is a whole new world for them.
If you really delve into the truth and start to see how it all works, you may make certain connections, such as why Jesus drove the money changers from the temple, how Britain became a great empire, and why the U.S. dollar has been lose its purchasing power. So many people spend money on a daily basis but don’t question the system behind it.
I am thinking of two theories about the future of the financial world. One theory is that smart technology skins have created blockchain technology, decentralized finance, and all of these technologies that are conquering the world. Another theory is that large financial institutions or governments have tried similar technologies and are today perhaps 10 years ahead of the publicly available DeFi movement. Either way, the elites behind Great reset The World Economic Forum, which is working to reform the world economy, has, of course, a plan and a new financial system that are ready to leave.
While elites are working to restore the benefits to the global economy, cryptographic startups are developing services that compete with Wall Street’s most powerful companies and central banks. Entrepreneurs and developers have begun to build so-called decentralized financing, which represents a completely new system where users can borrow money in a decentralized manner, among other options. A few years ago, your only choice was to do it through a bank.
While only central banks could print money not so long ago, DeFi is creating technologies where people can encode their own transaction currencies as tokens or cryptocurrencies. The Internet decentralized the creation and distribution of content; for example, anyone can then have a YouTube channel. DeFi does the same in terms of funding.
DeFi is the next development in the financial system
We once used gold as a common currency because it was scarce. Bitcoin (BTC) copies this scarcity model. Medicits were behind the first banks that encouraged people to store gold with them in exchange for paper representing the demand for your gold. They realized that no one would ever redeem all the gold at once, and began borrowing their property – similar to some of the current DeFi technology. In a way, the history of banking transactions can predict DeFI’s future.
The most promising DeFi applications today include protocols for decentralized interest rates, liquidity pools, standard models, etc. For example, suppose your bank has $ 10,000 and the bank gives you 0% interest or a negative interest on that money. DeFi platforms offer solutions where you can earn 3-4% for the same $ 10,000.
DeFi threatens large banks. They were anti-Bitcoin when a blockchain technology supporting it was tested behind the scenes. They doubted Bitcoin could change the balance in the financial world. Now they are publishing their own standard models and distributed general ledger infrastructures.
If you are looking at JPMorgan Chase, it is recent launched its own decentralized accounting with the Singapore government. As is usually the case, grassroots innovators were 2-3 years ahead of these giants. For this reason, I do not see the big banks still making groundbreaking transitions to DeF. Large banks will first focus on proven distributed general ledger solutions, such as cross-border payment solutions, replacement of Internet cloud systems with distributed general ledger cloud systems, and so on.
The future of decentralized financing
Many factors today affect DeF’s future. One is, for example Ethereum 2.0 and its attempt to solve the scalability of Ethereum. Its success or failure affects everything related to the Ethereum block chain.
Another factor is how banks and regulators react to the DeFi phenomenon. For the time being, it must regulate itself as an industry. We need to use ethics and develop solutions, such as insurance, that give people protection. Unless we develop and meet such criteria, DeFi will not be able to compete with the traditional banking system.
Encryption entrepreneurs should educate the public about DeFi to help them understand why this new technology can benefit people’s daily lives. Moreover, mass deployment of DeFi alone is unlikely. Some people simply don’t want to deal with fully decentralized technology.
The DeFi industry would benefit from incorporating certain aspects of the old financial world into its business model. There is a combination of DeFI and centralized funding or CeF.
Centralized and decentralized applications can be combined to create new types of economies and encourage more people to use DeFi. At the end of the day, you shouldn’t rely solely on smart contracts for all your savings. The industry is not yet so advanced.
New digital economies can emerge from anywhere in the world and can take many forms, creating opportunities for all. DeFi is not in a vacuum. It depends, for example, on technological developments and decentralization in general, including the Internet and security practices.
In addition, the old-fashioned financial system is fierce competition. As an industry, we need to be honest where we can thrive, and better understanding of the public is one of those areas. By combining DeFi and CeFi, we can make the transition from a centralized world to a decentralized world smoother and eventually win the age-old battle between DeFi and CeFi.
The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of the Cointelegraph.
Raoul Milhado is the CEO of Elitium. He has been building businesses since the beginning for the past 10 years and has worked hard to build a brand that lays the foundation for leveraging the ever-growing cryptography industry by bringing new age investment opportunities that would allow clients to experience a life they never thought possible. He is actively working to expand the new digital economy to help others live independent, dignified and growing lives.