The world of decentralized finance is exploding in creativity. It is currently creating new products and services that are mirroring the actual financial services. These new products are decentralized, in real-time, with no third party intermediaries, using programmability to pay out the obligations and recorded in the blockchain with a full audit trail that does not need reconciliations or an auditor that only verifies the transactions a year after the event.
Some examples are:
- Savings accounts where interest rates are paid in real-time on crypto savings.
- Mutual funds of security tokens are being created by users without relying on an intermediary service provider to create and administer the portfolio.
- Insurance payouts are happening in real-time. The insurable event, when it takes place, triggers the conditions defined in a smart contract and payment is therefore processed in real-time.
- Loyalty points across service providers will become tokens that will be able to be traded as any other type of asset in the blockchain ecosystem.
As the friction and cost of administration of all these financial products reduces, more people will come into the markets, and more innovative products will be available. In particular, micro transactions from micro loans, insurance, share transactions, real estate, art, or collectables can all be traded in a seamless interoperable manner at the touch of a screen.
We must not forget that owning real estate has been proven to be an important factor in wealth creation. However, the barrier to entry has prevented many from owning real estate. With blockchain technology, the fractional ownership of real estate will become easily accessible to all. If the government creates a digital decentralized database of real estate, then the buying and selling process can take place directly between the buyer and the seller without the need for intermediaries and without any time delays. An e-wallet of a digital currency will enable the payment of the transactions. Today, this vision can become a reality!
The key for financial digital assets to be traded, cleared and settled without the need for a third party intermediary, will be the availability of an e-wallet. E-wallets allow anyone to make payments on a real-time basis.
Millennials are the first generation to be digital natives. They want more choices to meet their own individual needs. They are self sufficient and they don’t fear the use of technology for financial transactions without having to rely on third party intermediaries. They have a low level of trust in traditional institutions, regulators and banks. Millennials want to see the trust embedded in the cryptography of the technology. They know the code cannot be bribed.
Millennials are global in nature, so they will not accept wall gardens or intermediaries that can abuse their power. They reject corruption and the transparency provided by blockchain technology will give them the ability to track and trace the relevant information.
The technology that provides the best user experience will be the one that will attract the most users. It is this desire that will drive new concepts of money and wealth to be created and it is just starting. The internet of value is now where the internet was back in 1994-1997. At that time when the first emails were being sent, no one could have imagined that one day for example, it would be possible to make a free call all over the world using technology.
Education of the newly available products and services using blockchain technology will be in great demand. I’m not saying cash won’t exist, but it will be less used and people will have the freedom to choose the products and services that they want to invest in.
There is a cryptocurrency exchange that has recently obtained a banking license in Wyoming, Kraken Bank. They will bring the benefits of a fully regulated bank into the crypto community to ensure that the in and out transfers are secured and regulated and therefore increase the adoption of use of cryptocurrencies.
The introduction of a CBDC in China will target 2 billion people along the Belt and Road trading corridors, which will put the supremacy of the dollar as the currency of choice in international trade at risk.
The tokenization of any fiat currency will ensure that it is:
- Less cost and friction
- No counterparty risk with commercial banks
- Reduce money laundering
- No wall gardens
Central Banks should take the responsibility to enhance the technology infrastructure and future proof their role in the global economy. As the world is moving to a digital tokenization of things of value, the currencies must not be analog but completely digital in the national interest.
For the first time in 500 years, our generation has the opportunity to architect a new financial system that is fundamentally more open, free and fair for everyone in the world- not just those that today have access and can afford it.
This is our chance to make a positive change that will last for many generations to come.
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