Through decades of financial change, regulation, inflation, war, political and economic changes we’ve been told that the hard “earned” money in our pocket is ours to spend as we please. However, the notion that we are in control of our own money and have the financial freedom to make our own financial decisions on our is a fallacy and an ideal that we’re falsely lead to believe.
Your hard-earned income should be a pathway to financial freedom and to provide for your family and invest in a higher standard of living.
The harder we work, the more we earn and the payoff for that work should be greater than before, but that’s not always the case.
Over the years the value of the money we get back from our work is eroded by the inflation of fiat currencies such as the Great British Pound (GBP) and the almighty US Dollar (USD).
A question to ask yourself is “What is a pound worth these days?” What could a pound have bought you 10 years ago? If you had the same job, with the same pay, over 10 years, would you be better or worse off? Taking the job security aspect out of the equation, you’ll always be worse off with a fiat currency-based economy (which is all of them).
Fiat currency-based economies came about in 1944 from the Bretton woods Agreement where delegates from 44 nations came together to build a new global financial system. This financial system pegged each nation’s currency against the US Dollar, which was in turn pegged to a gold price at $35 an ounce. In 1971 this system collapsed when President Nixon declared that there was not enough gold to back all the US Dollars in circulation and that the system built on the Bretton Woods act would unpeg the US Dollar from the gold standard. The buying power of the US Dollar has since plummeted by over 80% of its buying power since 1971 when the Bretton Woods financial system’s key component, the ability to convert Gold into US Dollars, was frozen.
This inflationary fiat-based economy which means working harder and saving for retirement ends up being a never-ending hamster wheel where the average middle-class working family cannot get ahead to get out of crippling debt, provide for their families or lead more comfortable lives. Our schooling and education systems are currently ill-equipped to properly educate the next generation of income-generating workers on how to properly financially educate themselves.
How do we effectively sidestep government-issued and central bank-backed fiat currency systems to protect our financial freedom? How do we ensure our own financial wealth preservation isn’t branded as illegal and money laundering?
“What is self-sovereign wealth and how do we achieve it?”
Whenever you hear the word crypto or blockchain, you immediately think Bitcoin, volatility, gambling and scams. You don’t think financial sovereignty or wealth preservation, because this space is still young and immature… but a new age of finance is coming where everyone can be involved.
In the current financial system when you want to make an investment to make some interest on your capital, you could issue a loan to someone. But how do you ensure they pay back what they say they will, on-time and in full? You can’t. Humans and fiat currency are impossible to hold to account and actions aren’t transparent to a wider group of validators to keep them accountable.
On the Ethereum blockchain and beyond, a new breed of finance is being developed and already delivering steady, secure and reliable returns for investors with the nickname “DeFi ”. Short for decentralized finance which is a smart-contract power economy where lenders and borrowers enter into a digital contract together where all actions are held to account.
If you are a lender you can issue a loan on a smart contract using a cryptocurrency or token such as Ethereum (ETH) or DAI (DAI). Once this submission to a contract occurs your principle is issued to a pool of funds available for borrowers to use for trading, investing and many other activities.
In order to access any of this pooled liquidity, a borrower must put up a digital asset up as collateral to borrow your funds and guarantee you an interest rate in return. These systems and platforms are becoming more sophisticated by the day and in the future could be the main use case that brings the financial world into the blockchain space.
Imagine a world where no investment was reserved for the super-rich and exclusive but available at a crowdfunded level where everyone can contribute and are equally held to account. Imagine a world where your hard-earned income can be put towards generating an additional income for you and your family to start a decentralized portfolio of investments that cannot be influenced by any central government or bank.
That’s a world I want to live in, a “DeFI” world of equal financial opportunities and financial sovereignty for all.
Examples of these types of systems already exist even though the industry is young and still evolving. These projects are built on top of ethereum infrastructure as smart contracts and decentralized applications. Most protocols run by securing and staking Ethereum (ETH) against a loan, lending contract or income-generating smart contract that over time delivers interest to the wallet that staked the original token.
Other protocols such as Bancor network have created new liquidity pools to connect various DeFi applications and trading exchanges together to increase throughput and accessibility in the eco-system. Uniswap is another example of this where a single developer, without millions in fund raising, built a simple swaping and staking dAPP with an Ethereum smart contract allowing any crypto investor anywhere in the world to stake ETH and become a market maker to produce income.
These types of applications are serving as a super-highway for liquidity to fuel new projects in the blockchain, DeFi and cryptocurrency eco-system. New ideas and projects that would usally struggle for traction early on are able to leverage these liquidity rich eco-systems from day 1 and grow organically as the eco-system of users, consumers and investors get to decide which project lives and dies.
Decentralized Finance (DeFi) will do what email did to the post office, what the internet did to the library. Decentralized Finance will upgrade, evolve and revolutionize the financial system in many unforeseen ways in the future. We are only still at the very beginning.
* This piece is opinion only and should not be taken as financial advice.
* I am not a financial advisor.
For more stories like this and crypto-specific news, go to:
If you’re interested in taking the next step and investing into crypto and DeFi products, signup your free crypto trading account at https://www.coinpass.com/register and start investing in the next evolution of money today.