Traditional, classical or most of the current financial systems are setup on trust. Trust that organisations that are regulated will follow regulatory guidance on their processes. Trust that when you engage with them or buy a financial product from them, it will serve the purpose it is intended to. Trust that when you trade against a financial institution, as you would do when they take the counter party position to a derivatives trade, they will fulfil the obligation and give you the money they owe you. Trust that they will not misuse your information to their advantage and deal with you fairly.
Have you heard where banks go bankrupt and can't return people's money? Or do you know that only a certain amount of the money in your account is actually insured (for example GBP 50k [pls confirm] in UK or CHF 100k in Switzerland)? Have you fallen foul of the small print in your agreement with a financial institution that wasn't visible to you or not made known to you? Did you know that while you feel safe parking your money in a bank, the banks are taking immeasurable risk with your money to make profits while charging you negative interest rates?
These are the two things that the new blockchain and cryptocurrency-based revolution can deliver to you. Let's explore one concept at a time.
Self-sovereignty implies that you are in total control of all things related to you and that you do not rely on anyone else for anything that you may need. Self-sovereignty in financial terms means you are in full control of your money, what happens with your money, how you invest it or just hold it and no one else can have access to your money without your explicit permission. Today this is extremely easy to achieve if you hold your "money" in cryptocurrencies, digital assets, stablecoins or even tokenized securities. No need for a bank. You carry it on you or put it in a safe place for when you need it. Its your call. Its your privilege and responsibility.
Now that you have full control over your monies, how about making more with that money? You know the kind that your bank pushes you to invest it? Or what broker shills you every now and then?
Immutable transparency means...
Well today there are a myriad of options to invest your cryptocurrencies and stable-coins in decentralized platforms that let you earn an interest on your holdings, or borrow against, or put it up for creating pooled funds that are further used to provide liquidity to other financial functions such as mortgages or financial products, or participate in decentralized "defi" derivatives, etc.
Now wouldn't it be risky to participate in these platforms that aren't run by your banks? Or well known domestic names of the financial industry? Can you really trust them?
The answer is yes.
Yes, because these applications and platforms run on decentralized ledger technologies (DLT) and blockchain technologies. Blockchain technologies ensure that there is no cheating or tampering occurring as each new transaction is built on top of the hash of previous batch of transactions. These hashes are stored on thousands of nodes or computers around the world that authenticate these hashes and ensure that the chain of data sorted in blocks (or blockchain) is not tampered with. This gives you the confidence of full transparency and immutability of information, transactions and outcomes of those transactions.
Yes, because most or all of these platforms run on audited smart contracts (bunch of code that executes automated sequence of transactions and follows the conditions laid out for every participant to meet). The large community that looks at the smart contracts and the auditors that check the code for correctness and security ensure that when you put your digital assets and crypto currencies or stable-coins to work, they will work on exactly what you intended for it and that all will be done in a trustless (so immutably trustworthy that you don't even need to trust it, it just happens, like the sun rising in the East).
At www.closecross.com we are using these pillars to create a non-custodial multi-party derivatives platform that is a people-only platform. There are no banks, brokers or derivative issuers needed. People interact between themselves, make predictions of financial assets such as cryptocurrencies (BTC, ETH, XRP, etc.), stocks (Apple, Tesla, etc.), indexes (Down Jones, NASDAQ, etc.), commodities (Gold, Oil, etc.) and foreign exchange (forex pairs like USDGBP, USDEUR, etc.).
Be self-sovereign as much as possible and benefit from trustless platforms that deliver you more value compared to the existing financial structures. Start your engagement with the defi derivatives today. Sign-up now.
Founder, CloseCross - Decentralized derivatives driving democratic participation
The views and opinions expressed herein are the views and opinions of the author and should not be considered as an investment advice.