Decentralization is the Future

I would like to begin my post with a disclaimer. I am not a financial advisor nor does have extensive knowledge when it comes to crypto or banking. What I wrote here will be my personal opinion purely based on the information that I currently have and may not be 100% accurate. it should not be taken as a financial advice.

It wouldn't be a surprise if most people on the cryptocurrency world also have a bank account and probably, many of us already have a bank account to be our first exposure on any financial systems as it was only until 2009 when the first cryptocurrency, known as Bitcoin, was created. That said, the creation of Bitcoin what revolutionized the financial system with the idea of Decentralized Finance also known as DeFi or Decentralized Banking. The Idea behind Decentralized Banking is that there are no central authority that put control over our finances, savings and transactions and instead put the control on us, individual people, backed by the blockchain where every single transactions are encrypted and traceable. On the other hand, Centralized Banking is a system where there is a central authority that is making the decisions as to where to put or invest our money, regardless of our knowledge or our will.

DeFi Over Banks

Between the two, I would rather have my money to be saved on a crypto wallet and already have saved a substantial amount of different crypto assets and NFT's but with the cryptocurrency only have more than a decade since its creation, its still a very young financial system and complete adoption would still be far in the future which is to say that banking institutions would still be required for our real world transactions such as paying bills and loans. There are various reasons for this such as lack of knowledge and fear of something new but it also comes down with the bank's retaliation to be significant on our continuously evolving society in order to continue to juice the people out of their money as much as they can. This was the case that happens with Silicon Valley Bank that collapse just recently. SVB invest its depositors money on government bonds which is deemed to be safe but with interest rates continues to went up, the value of those bonds went down and as their depositors continue to withdraw money, the bank does not have the enough liquidity needed to provide the cash for those withdrawals. This eventually leads the bank to sell the government bonds at a loss. Some depositors got a hint about this which leads to panic to withdraw money totaled around $42 billion of deposits that causes SVB to go bankrupt. Despite this, the central authority which is the CEO and top executives line out their pockets with millions of dollars, unaffected and cannot be held accountable with the collapse of the bank despite their terrible decisions which ended up for people to lose its money. This is not the first time that this happen and won't be the last that it will as long as we trust our hard earned money on central banks which could lead on global crisis just like the 2008 Financial Crisis.

The Appeal of Crypto Wallet

Crypto wallets have a series of passwords and keys that only the person that owns the money have the access on it for an increased security. For example, upon creating of your Hive account, you will be given a Memo, Posting, Active, Owner and Master keys, each of which have individual uses and unlike your social media accounts, it is not stored on database so only you would have the access on your assets unless, you let others to have access to your keys or you get hacked but this would only happen if you become careless and the wallet itself has nothing to do with it though you can still retrieve your account using by having a recovery account.

As I said above, what DeFi offers was that it was backed by blockchain and we have the control on our own assets so we won't have the fear of banks running with our money. Every transactions can are recorded so we can keep a record of it. For example, If I want to sell an NFT artwork on NFTshowroom, since this was encoded on the blockchain, it would keep a ledger of that transaction so no matter how many times, I sold that artwork, I can keep a record of it which is important because it can prevent fraud and if I got stolen money, I would know how much was stolen and the blockchain address of the culprit and with this, there is a chance to freeze that address and retrieve that money back.

Since, there is no central institutions that was managing all this different crypto wallets, people unknown to crypto might think that we have become a mess of a structure and would find it hard to maintain the infrastructures that allows the blockchain to run but that was entirely wrong. On hive we have what its called as the Decentralized Hive Fund where each individual Hivers can make proposals by paying a certain amount of Hive which for its creation and for the duration that it was posted. Each Hivers have the ability to vote and is proportionally equal to their Hive Power.

Since complete adoption of Crypto and crypto wallets feels like it would still be far for it to happen, I have no choice but to have use both centralized and decentralized banks for my saving which I think is the most optimal option for now and given that assets on both systems can either go up and down in value, diversifying my assets on different ways would allow me to survive in case that one of those goes down and hold them until they regain their value or increase in prize. In order for banks to keep on becoming relevant, they would need to have more transparency with how are they investing our money but I highly doubt they would do that since the people on the top would always prioritize their profits. I believed though that Decentralization will be the future of finance and will bring to us more freedom.

Thank you for reading my post and see you at the next one!