Decentralized Finance: An Emerging Frontier
What is Decentralized Finance, and why is it needed? Cryptocurrency’s promise is to make money and payments accessible– to anyone, no matter where they are in the world. The Decentralized Finance (DeFi) or Open Finance movement takes that promise a step further.
Decentralized Finance aims to make financial services accessible to anyone in the world with a smartphone and internet connection. The French poet and novelist Victor Hugo once said, “Nothing else in the world…not all the armies…is so powerful as an idea whose time has come.” Can this be said about cryptocurrency?
Not all roses and butterflies…
It is no longer news that Binance, Coinbase, and many other crypto companies have faced strong opposition in recent times. As a result of this, they have bowed to pressure from regulatory bodies. Coinbase planned to release a lending program that was going to yield 4% annual returns on USDC deposits. Yet, in a quick turnaround, it has changed its position. The U.S based exchange has announced it would no longer be pursuing the program.
“Nothing else in the world…not all the armies…is so powerful as an idea whose time has come.”–Victor Hugo
Since the start of Industrial-era finance, the banking system has relied on institutions. This is most pronounced in developed markets.
Financial institutions, law firms, and regulatory bodies serve as the foundational “trust layer.” Such a construct was necessary to insure against systemic risk. To support this system, there are intermediaries within each aspect of financial services. We have payment service providers, third-party administrators, trade clearinghouses, brokers, etc.
The middlemen in the traditional finance industry are powerful. They include investment bankers, stockbrokers, and others. They are not going to fold their arms without a fight. They know what is coming. They know that cryptocurrency would cause a major disruption in the finance ecosystem. They are going to do whatever they can be it by lobbying, regulation, or whatever means possible. Even if it means buying more time.
How Ethical is Blockchain monitoring?
Blockchain intelligence services track transactions and connect them to their owners in a process known as anonymization by correlation. Through the use of algorithms that crawl through transactions on the blockchain, analysis organizations can easily track cryptocurrency addresses of interest. Those who argue in favor of tracking cite the need to deter cyberattacks and prevent ransomware, money laundering, and stopping illegal activity.
Nevertheless, crypto enthusiasts are aware that some companies have the tendency to dig deeper than necessary, often interfering with individuals’ private affairs. This is not different from tracking cookies over the internet. When it comes to financial information, we need to draw the line.
When you do not know the normal use (purpose) of a thing, you will abuse it. Abuse is derived from the words Abnormal USE. In other words, when you don’t know why something exists, then you will abuse it because it is not being utilized or consumed in the way it was designed or created.
If cryptocurrencies are to disrupt the status quo, we must agree that transactions are public and not for the sake of criminals. Regulators need to protect people’s right to privacy. Today, banks protect privacy to a degree by making transactions invisible to third parties. The same should apply to blockchain.
How decentralized is decentralized enough?
Transactions on the blockchain attract because blocks change transparency. This is both a blessing and a curse. Without transparency, blockchains could lose their value proposition as transaction tracking brings a lot of benefits such as voting shipping payment tracking order tracking, and much more.
There is a degree of anonymity in the sense that the name and location of individuals are not being tracked, rather they are dresses, and the funds held can be tracked. Blockchain intelligence succeeds by linking addresses to real-world identities by taking into consideration other factors. These include linking to identification methods and other features.
From this perspective, the hope for attaining a perfect system that is fit for national and international needs within a secure blockchain seems to be far from reach.
The Vision for Bitcoin and crypto
The vision for Bitcoin is decentralization. The vision is not to take permission from anyone to send or receive coins. Bitcoin abstracts you from the arbitrary decisions of humans who always end up yielding to corruption.
Bitcoin is the best money in the world: it is the money of the people supported by the people. Bitcoin gives you back the power over money, which has enormous consequences for your life. You can then live your life on your own terms, thanks to Bitcoin.
Blockchain is The Way Out of Ransomware Attacks
Blockchain is a roadblock for ransomware. The most important reason is that blockchain solutions are decentralized, which means there wouldn’t be any reproduction of information that might be held for ransom. Knowledge could be safely accessed from a variety of privileged clients.
Additionally, blockchain is immutable. When information has been written to a blockchain, no one, not even a system administrator, can alter it. This ensures advantages for audit purposes as well.
As a supplier of data, your information hasn’t been altered, and as a recipient, you can be sure that the information hasn’t been altered either.
Blockchain makes use of sequential hashing — the transaction blocks are linked with the aid of hashes to create a specified historical past that assesses and secures the integrity of the chain every 10 minutes.
Along with knowledge encryption, it makes it almost impossible for any person to unilaterally alter information on the ledger without it being noticed right away. Hence, firms handling sensitive expertise can be assured of the integrity of data.
Blockchain — The antidote?
Most ransomware attackers demand payment in bitcoins, which is one of the implementations of blockchain. However, the technological know-how that ransomware hackers use could also be the antidote to such attacks.
So, even though bitcoin payments are currently being exploited by attackers, other blockchain implementations could help the enterprise in the fight against ransomware attacks. Because with blockchain, there’s no single point of failure that can be attacked.
