Investments and trading<\/li>\n<\/ol>\nNeedless to say, investment and trading were revolutionized by FinTech via mobile trading apps. Nowadays, anybody anywhere in the world can (and does) invest money in \u201cstonks\u201d via various (free) trading apps, without requiring the services of a stock broker, and many apps are commission free.<\/p>\n
FinTech literally democratized trading and investment in the financial markets, and the future will tell us if that was a good idea or not.<\/p>\n
<\/p>\n
7.Microfinance<\/h3>\n
<\/p>\n
With widespread and affordable mobile internet becoming the norm, developing countries are now interconnected with the international financial system in what can be described as financial inclusion, courtesy of the digital revolution.<\/p>\n
The past decade has been promising for people living in Sub-Saharan Africa. Just to give you a taste, according to Global Findex, the number of people that have a bank account in Sub-Saharan Africa almost doubled in 6 years, between 2011 and 2017 (23.2 percent in 2011 vs 42.6 percent in 2017), with 21 percent of adults using mobile banking services.<\/p>\n
This is a huge and virtually untapped market for FSPs (financial service providers) looking to grow their customer base and make an honest buck.<\/p>\n
FinTech makes for a great opportunity for traditional microfinance institutions to optimize their business in developing countries via reducing operating costs and operational risks, as\u00a0 microfinance institutions in developing countries are no longer forced to do business in high density urban centres only; moreover, due to AI and digitalization, MFIs are renouncing manual\/paper based transactions in favour of automation, which further reduces risks and human error.<\/p>\n
With all these in mind, it becomes clear that digitalisation is not a choice but a necessity in the modern financial market, especially in developing countries, and FinTech\u2019s impact on the banking\/financial industry is a truly transformative event in the good sense of the word.<\/p>\n
It\u2019s also true that microfinance institutions encountered a number of issues with adopting digitalization, especially in the early phases of the process, due to inherent difficulties, such as the work-force requiring training in order to get accustomed to new technologies.<\/p>\n
The training of human capital in order to get accustomed and utilize new technologies was arguably the most difficult aspect of digitalization in microfinance institutions.<\/p>\n
Here are the main steps required by the microfinance industry towards the adaptation of digitalization:<\/p>\n
<\/p>\n
DIGITAL RECORD KEEPING: as expected, digital record keeping is arguably the number one step towards digitization in the microfinance industry. The MFI uses internet and digitalization to build a data base with all customer data, accessible anytime\/anywhere, that includes virtually anything, ranging from clients and customers names to outstanding dues, analysis reports of loans and anything in between.<\/p>\n
<\/p>\n
It has been proven empirically that digital records are superior to physical data collection, and being able to link ID proofs to customers\u2019 accounts works great for the MFI companies, especially when it comes to customer satisfaction and operation security.<\/p>\n
<\/p>\n
DIGITIZE PAYMENTS AND LOANS INTERNALLY: on top of migrating from physical to digital records, the MFI institutions and companies are working hard at digitalizing the internal system, as digital internal processing has been proven to save both time and manpower.<\/p>\n
<\/p>\n
Even if the groundwork is still manual and relatively unorganized, especially in rural areas, where few customers have access to modern day technology (internet, smartphones and know-how), with most proceedings being time consuming and manual, things are slowly improving.<\/p>\n
<\/p>\n
DIGITIZING CUSTOMER MANAGEMENT SYSTEM: customer management is another process that profits big from digitalization. Due to modern technology and internet, the process of digitalization in microfinance services helps staff publicize new products and schemes instantly and easily via digital platforms.<\/p>\n
<\/p>\n
This is a huge leap forward in terms of responding to customer demands, as well as conducting research in regard to customer behaviour. As with other industries, the process of digitalization in the microfinance industry has been transformational in a good way, especially in terms of keeping a human centred approach on the behalf of customers.<\/p>\n
<\/p>\n
Another important thing in digitalizing the management system is that institutions took proactive measures to educate their customers in order to get them acquainted to new technologies, and that\u2019s crucial considering the fact that as technology advances almost on a daily basis, the microfinance industry is literally forced to keep up with the changes, in order to stay relevant in a highly competitive environment.<\/p>\n
<\/p>\n
Digital Currencies<\/p>\n
<\/p>\n
Responsible governments always work together with private companies to make their economies more productive and more efficient, and the rise of cryptocurrencies definitely drew their attention. The cryptocurrency market is booming and crypto-adoption by traditional companies like Visa or PayPal is one of the main trends of 2021. Even central banks seem interested in state-backed digital currencies, and by that we mean CBDCs, as in central bank digital currencies<\/p>\n
The logical question to ask is how CBDCs can help grow economy and progress society. Are there any benefits for the general public with large scale adoption of CBDCs? Here\u2019s the deal: unlike blockchain\/decentralized crypto currencies, a CBDCs is basically digital fiat, or, to make it real easy, the paper dollar made digital.<\/p>\n
In certain ways, a CBDC is pretty similar to crypto currencies, in such they offer cheaper and faster transactions compared to regular money, as well as higher security and transparency. The problem is that the CBDC are state-issued, which means they are controlled by state actors, and that doesn\u2019t hold well with the crypto crowd.<\/p>\n
Governments are very interested in CBDCs as a fully digital currency gives them the capability of monitoring\/analysing the macroeconomic situation of a given country in real time, thus helping central banks and governments to implement monetary policies in a more comprehensive manner.<\/p>\n
The downside of CBDCs is that there\u2019s no more privacy for citizens, and as we move towards a cashless society, the state or state sponsored actors will have total control over people\u2019s personal finances.<\/p>\n
However, governments claim that wide-adoption of CBDCs will help them eradicate various illegal activities such as fraud and money laundering, thus allowing citizens to keep their money safe and so on.<\/p>\n
<\/p>\n
On top of that, CBDCs may become a viable financial solution for people who don\u2019t have a bank account, and help with improving international money transfers via DLT technology, which removes third parties\/intermediaries, thus making financial transactions less costly and much faster.<\/p>\n
All these advantages and disadvantages are theoretical, as central bank digital currencies are not here yet, and it would take a government decision to implement CBDC and distribute it among its population. The problem is that there are many other viable options (crypto currencies like BTC) and ideas in circulation around the world, which means CBDC is not a done deal.<\/p>\n
The point being, CBDC have the potential to create a brand new worldwide financial infrastructure, but for now, we\u2019ll just have to wait and see what happens.<\/p>\n
<\/p>\n
2 Common ways of making profits with cryptocurrencies (~6p)<\/h2>\n
<\/p>\n
If you were paying attention to what\u2019s going on in the world, you probably noticed that cryptocurrencies had a wild year, being one of the fastest growing digital assets.<\/p>\n
<\/p>\n
Most cryptocurrencies rely on blockchain and are enabled for trading, and despite their original intent, i.e. to make for an alternative to the SWIFT system, they have become a so-called store of value, being sold and bought as an investment of sorts by people from all over the world.<\/p>\n
<\/p>\n
If you are looking to make money with cryptocurrencies, keep reading.<\/p>\n
<\/p>\n
Best Ways to Make Money with Cryptocurrencies<\/h3>\n
<\/p>\n
Since we live in a global economy, emerging financial markets are arguably the best places to look at if you want to make money from crypto. Here are a few examples.<\/p>\n
<\/p>\n
1. Mining<\/h4>\n
<\/p>\n
Unlike fiat money, which is literally printed out of thin air by central banks (or commercial banks via fractional banking, a little known fact), cryptocurrencies are limited in number (as in they are non-inflationary), and new ones are created via mining, i.e. computers solving cryptographic equations. That\u2019s an oversimplification, obviously, but you got the point.<\/p>\n
<\/p>\n
The process of crypto mining involves blockchain, i.e. validating data blocks by all the computers in the network, as well as adding transaction records to a ledger (a public record also known as blockchain).<\/p>\n
<\/p>\n
So, to make a long story short, crypto mining is a transactional process involving computers or mining rigs and problem solving\/cryptographic processes to solve complex equations, with the end result being data recorded to a public ledger (blockchain).<\/p>\n
<\/p>\n
A crypto currency is literally a network of computers involved in crypto mining that keep shared records using blockchain. Initially, crypto currencies were created as an alternative to the antiquated SWIFT system, in order to circumvent banks and allow peer to peer financial transactions between regular people, thus taking out the intermediaries.<\/p>\n
<\/p>\n
In order to be crystal clear on how crypto mining works, you must first understand what the difference between centralized and decentralized systems is.<\/p>\n
<\/p>\n
Traditional Banks Are Centralized Systems<\/p>\n
<\/p>\n
Centralized banking means that there\u2019s a central authority (the central bank) that processes every transaction, which is recorded and verified. The central bank controls, maintains and updates a ledger or a centralized record. Needless to say, this is a highly restricted system, as only banks are allowed to connect to the system directly and perform financial transactions.<\/p>\n
<\/p>\n
Cryptocurrencies Use Decentralized, Distributed Systems<\/p>\n
<\/p>\n
Cryptocurrencies are the opposite of traditional banking, as there\u2019s no centralized ledger or a central authority. Cryptocurrencies use a distributed ledger, the blockchain thing I told you previously, and they operate in a completely decentralized system, where any user can connect directly and participate in the system, much like in P2P torrenting, provided you\u2019re old enough to remember.<\/p>\n
<\/p>\n
Basically, using crypto, you can send\/receive payments directly to\/from anyone in the network, without requiring a third party arbitrage (central bank). That\u2019s what a decentralized digital currency is.<\/p>\n
<\/p>\n
On top of being decentralized, cryptocurrency makes for a distributed system. Distributed means that the ledger (blockchain) is not secret, i.e. all the transactions are a matter of public record and anybody in the network has access to the ledger, as it is stored on all of the different computers\/devices. This is the exact opposite of central banking, where only the bank has access to the ledger (centralized record).<\/p>\n
<\/p>\n
Since there is no central authority to verify the transactions before being added to the ledger\/blockchain, cryptocurrency relies on cryptographic algorithms.<\/p>\n
<\/p>\n
And here\u2019s where crypto miners come into play: they use their computers\/devices to add new transactions to the ledger\/blockchain by solving very complex cryptographic problems, and as a reward for doing so, they receive a small amount of the respective crypto.<\/p>\n
<\/p>\n
2. PoS Blockchain Staking<\/h4>\n
<\/p>\n
Staking is very similar to getting interest from a bank account, as in you invest or lock up money in a particular cryptocurrency, let\u2019s say BTC for the sake of argument, and you earn interest on it in the form of new crypto.<\/p>\n
<\/p>\n
As a bonus, you can also benefit from the respective crypto\u2019s appreciation if its value rises over time, provided you hold on to your coins long enough.<\/p>\n
<\/p>\n
Besides mining to add new blocks to the blockchain, in a process called Proof of Work, you can add\/validate new blocks via Proof of Stake or staking. Staking basically means that there are people called validators who hold on to their coins, or lock up their coins, in order to participate in a game of sorts, i.e. they are randomly selected by the network protocol at specific intervals to create a block (interest).<\/p>\n
<\/p>\n
The more coins are locked up, or staked, the higher the chances are to be selected by the system as the next block validator. This clever system allows regular people who don\u2019t have money to spend on expensive mining rigs to participate in the cryptocurrency creation process via direct investment. Also, staking works as an incentive for people to hold on to their coins, instead of selling them for profit, as well as a mean to boost network security.<\/p>\n
<\/p>\n
More precisely, if block validators fail to maintain network security, their stake is at risk, but if they operate legitimately, they get a nice reward.<\/p>\n
<\/p>\n
3. Buying & HODLing<\/h4>\n
<\/p>\n
This process can also be called investing in crypto. More specifically, one will choose a coin of their liking, hopefully a successful one with good prospects for the future, invest money in it, and then hold on to the coins, expecting for the price to go to the Moon, to use the parlance of our times.<\/p>\n
<\/p>\n
If\/when the respective coin one\u2019s HODLing has reached a price high enough, a nice profit can be made by liquidating the respective investment via a crypto exchange like Coinbase.<\/p>\n
<\/p>\n
This is HODLing 101: buy crypto low, and sell high for profit.<\/p>\n
<\/p>\n
4. Trading<\/h4>\n
<\/p>\n
As the name suggests, trading means that crypto is very similar to stocks. As in, you can buy and sell cryptocurrency\/tokens for profit like regular day traders, using a crypto exchange of your liking.<\/p>\n
<\/p>\n
Just like with stock trading, there\u2019s crypto day-trading, so profits can be made by selling\/buying crypto on the same day.<\/p>\n
<\/p>\n
As usual, there\u2019s only one rule: buy low, and sell high.<\/p>\n
<\/p>\n
5. Investing<\/h4>\n
<\/p>\n
The main strategy for earning money in the crypto space is investing. There are many ways to earn money by investing in crypto. The most common way is to literally buy crypto, i.e. direct investment or partnership, and wait for the price to go up. Another method is through initial coin offering, and finally, through exchanges.<\/p>\n
<\/p>\n
Investing in cryptocurrencies makes for a two-prong approach in terms of investing: first, you make money as the coin\/token appreciates in value over time, but there are also profits to be made through one\u2019s share in the respective project.<\/p>\n
<\/p>\n
Some cryptocurrencies offer various perks to investors, such as access to the project or product, or, the ability to use the respective coin to make payments.<\/p>\n
<\/p>\n
6. Bonus Coins\/Tokens<\/h4>\n
<\/p>\n
This is one of the easiest ways to earn cryptocurrencies, and the best thing about it is that you don\u2019t have to actually invest (as in spend money) in anything. All you have to do is to participate in the airdrop\/bounty program of the respective coin, perform a bunch of easy tasks, and you\u2019ll get a nice reward, i.e. free coins.<\/p>\n
<\/p>\n
Bonus tokens can also be earned in the ICO phase of a particular cryptocurrency, or the token sale phase, as early investors in new projects are often rewarded in such way.<\/p>\n
<\/p>\n
7. Referral<\/h4>\n
<\/p>\n
Referral programs should be familiar to all internet users, and crypto referral programs work in the same way as, let\u2019s say Amazon referral links. Needless to say, referral programs are the way to go if you don\u2019t have money to invest in a cryptocurrency, but you still want to participate in a particular project.<\/p>\n
<\/p>\n
In most cases, all that\u2019s required is to register on a website, get a unique referral code, and then start refer the cryptocurrency to earn bonus tokens. To give you an example, WISE, as well as other cryptocurrencies, encourages this approach by offering juicy bonuses for referrals, i.e. both the referrer and the referee get 10 percent bonus tokens for each successful transaction that takes place through referral.<\/p>\n
<\/p>\n
8. Sell for Cryptocurrencies<\/h4>\n
<\/p>\n
Basically, if you\u2019re an internet merchant, you can always accept crypto like BTC or Ripple in exchange for your goods or services.<\/p>\n
<\/p>\n
Cryptocurrencies are literally digital money, or at least that\u2019s the theory, and they are designed to be easily transacted world-wide, without having to rely on third parties or convert them in other currencies.<\/p>\n
<\/p>\n
The only problem with accepting payments in crypto is that their price relative to the US dollar is always fluctuating and \u201cprice discovery\u201d in crypto is almost impossible (you\u2019ll still have to price your stuff in $).<\/p>\n
<\/p>\n
Other than that, global transactions can be easily switched to crypto, and there are many payment processors that can help your online\/offline shop to integrate crypto payment options.<\/p>\n
<\/p>\n
9. Dividends<\/h4>\n
<\/p>\n
Just like with stocks dividends, you can invest in cryptocurrency and earn fixed interest in the form of dividends. Ideally speaking, you will have to HODL, as in buy and hold for a certain period of time in order to earn interest.<\/p>\n
<\/p>\n
Top dividend cryptocurrencies include NEXO and BNB, to name just a few, and most of them will earn you interest without having to stake.<\/p>\n
<\/p>\n
10. DeFi<\/h4>\n
<\/p>\n
DeFi stands for decentralized finance, and the main advantages of DeFi include managing payroll and earning a passive income. Everything is made possible due to dapps also known as DeFi apps, via regular web interfaces or decentralized Web 3.0 gateways.<\/p>\n
<\/p>\n
The rise of DeFi allowed both individuals and businesses easy access to alternative financial products and services and due to the decentralized nature of DeFi and the rapid growth of its software ecosystem\/components, customers are now able to interact with the system via various methods.<\/p>\n
<\/p>\n
DeFi\u2019s smart contract tools are a boon for businesses, as power users can now leverage smart contract functionalities to get the most out from escrow and insurance pooling, to give you just a couple of examples.<\/p>\n
<\/p>\n
Early adopters of DeFi used decentralized synthetics hubs like Shadows Network, which allowed users to trade, issue, borrow and lend synthetic assets (derivatives or clones of real-world assets).<\/p>\n
<\/p>\n
NFTs are also booming, going further than mere collectibles, and even the very fabric of the internet\u00a0 (content provision) is becoming decentralized via networks like AIOZ. Arguably, the best thing about DeFi is that it allows participants to leverage existing crypto capital in order to make profit.<\/p>\n
<\/p>\n
More precisely, you can earn profit or yield by staking the crypto you own into DeFi protocols, without having to risk your stack in trading\/speculating. Even if interacting with DeFi is not risk free, it\u2019s still fairly safe compared to other crypto-involved economic activities in terms of generating profit.<\/p>\n
<\/p>\n
For patient people with a modest initial capital, DeFi is a great opportunity to earn a residual income via staking, yield farming and lending. Slowly, your initial capital will grow, even if you\u2019ll not get rich overnight, and the main advantage of a passive guaranteed income is that you won\u2019t have to worry about the crazy rollercoaster ride also known as the crypto market, and we\u2019re talking about market dips obviously. That is to say, you\u2019ll keep on earning even as prices are dropping.<\/p>\n
<\/p>\n
Here are four of the most popular ways of generating a passive income in decentralized finance:<\/p>\n
<\/p>\n
Method 1: Staking<\/h5>\n
<\/p>\n
We already talked about staking, but in this context, staking refers to locking or staking tokens into a smart contract, like an investment of sorts, and then earning more of the same token over time in return. A token is the native asset of the blockchain, like ETH is the token of Ethereum.<\/p>\n
<\/p>\n
If you are wondering what is the incentive for someone giving you tokens for free just for staking your existing tokens, the answer is Proof of Stake, and yes, we already talked about that also.<\/p>\n
<\/p>\n
The philosophy behind token incentives to reward network users is that blockchain is secured via Proof of Stake, with network validators being the people in charge of security, i.e. those who make sure no one is trying to cheat and uphold consensus rules.<\/p>\n
<\/p>\n
In order to have a blockchain backed up by Proof of Stake, you require users locking\/staking their assets into smart contracts, and these contracts are controlled by network validators.<\/p>\n
<\/p>\n
Dishonest validators are punished by losing part of their stake, and stakers are given free tokens as an incentive to keep their assets locked for an extended period of time, as they contribute to the blockchain\u2019s decentralization and security.<\/p>\n
<\/p>\n
To make it simple, the free tokens are offered to keep people involved in the blockchain, i.e. to keep the network online and secure. In the case of Ethereum, users with ETH tokens locked into the Ethereum 2.0 smart contracts will earn extra ETH for upholding consensus rules in a fully automated process that requires no human input or oversight.<\/p>\n
<\/p>\n
That means once you\u2019re locked into an Ethereum 2.0 smart contract (you deposit the funds respectively), the Proof of Stake mechanism will automatically kick in and claim your rewards periodically. It\u2019s worth mentioning that Ethereum 2.0 requires you to stay invested (staked) for an extended period of time, which means it makes for a good option for people with a low-time preference.<\/p>\n
<\/p>\n
Also, even if the minimum requirement to stake in Ethereum 2.0 is 32 tokens or ETH, the restriction can be circumvented on certain platforms that use a pooling mechanism, so you can deposit a lesser amount.<\/p>\n
<\/p>\n
Method #2: Become a liquidity provider<\/h5>\n
<\/p>\n
Liquidity providers, also known as LPs, are made possible by decentralized exchanges which allow swapping between token pairs, such as USDT and ETH for example; by doing so, regular DeFi users can pool their resources (tokens) via smart contracts, and earn a fee from all transactions (swaps), proportionally to their pool share.<\/p>\n
<\/p>\n
Obviously, the more transactions are made via the respective pool, the more money is to be earned. However, being a liquidity provider is not fail proof, as in you\u2019re not guaranteed to make a profit, due to market volatility. More precisely, the price of tokens is always fluctuating, and if the price of one of the pooled tokens goes down significantly, you may lose money.<\/p>\n
<\/p>\n
This process is called IL or impermanent loss, but you can mitigate the IL issue by investing in highly liquid pools with less volatile tokens, such as ETH\/WBTC.<\/p>\n
<\/p>\n
In order to maximize profits, we would recommend a thorough analysis of real-time data gathered by LP aggregators; in this way, you can make an educated guess regarding potential returns from different pools.<\/p>\n
<\/p>\n
Method #3: Yield farming<\/h5>\n
<\/p>\n
As explained previously, liquidity providers are rewarded with free tokens proportional to their pool share. Yield farming consists of further locking these tokens into essentially DeFi protocols that will earn you even more tokens (the same or different tokens), and that\u2019s basically a double-whammy for investors: you earn a share of all fees with your pooled assets, and on top of that, you can also earn LP tokens.<\/p>\n
<\/p>\n
When engaging in yield farming, it is highly important to make sure the platform you\u2019re using is legitimate, i.e. the developers are serious and will not try to scam you long-term by stealing LP tokens for example, and using them to cash out from DEX pools.<\/p>\n
<\/p>\n
Always look for established platforms with a ton of positive reviews, and, most importantly, platforms whose smart contracts have been audited by third parties.<\/p>\n
<\/p>\n
Method #4: Lending<\/h5>\n
<\/p>\n
If you\u2019re locking your tokens into a smart contract on a lending platform, you\u2019ll earn an annual percentage yield, or APY (the same goes with bank deposit accounts). Your tokens are further lent to borrowers, who obviously pay interest, and part of the respective interest is your kickback.<\/p>\n
<\/p>\n
3 Challenges and Risks for cryptocurrency enthusiasts (~3 pages)<\/h2>\n
<\/p>\n
As with any other technology, cryptocurrency can be a benefit or a hazard. The rise of crypto and widespread adoption of blockchain attracts both legitimate investors and unsavory characters looking to profit one way or the other.<\/p>\n
<\/p>\n
Criminals are looking to use cryptocurencies for money laundering operations, while legitimate investors try to profit from the lack of regulation in the industry, which allows for large gains to go unreported with financial authorities in order to avoid taxes, capital gains and so on.<\/p>\n
<\/p>\n
As the market cap for crypto is in the trillions, governments as well as international financial institutions are already screaming bloody murder.<\/p>\n
<\/p>\n
Here are the main financial and legal risks of using cryptocurrencies:<\/p>\n
<\/p>\n
Little to no regulation<\/h3>\n
<\/p>\n
Even if the crypto market is a free-for-all kind of a deal, there are good arguments to be made in favor of governments getting involved.<\/p>\n
<\/p>\n
The scope of having a government after all is to protect the interest of the people and assure a fair playground for all, hence regulating the crypto market should mean protecting people from fraudulent\/abusive actors rather than attempting to capitalize on revenue (crypto gain tax is already a thing in the US by the way).<\/p>\n
<\/p>\n
For example, US based financial actors must acquire an accreditation from the SEC before making large speculative investments, in order to prove they can afford potential loses.<\/p>\n
<\/p>\n
Some argue that cryptocurrencies should be treated the same, while others are going for the libertarian argument of allowing people to blindly invest in a 100% free\/unregulated market, and let the invisible hand of the market sort things out.<\/p>\n
<\/p>\n
The thing is, having a 100% free market and a decentralized\/universal cryptocurrency sounds great, but the problem is that the price of crypto fluctuates wildly on a daily basis due to speculators (including banks and multi-billion-dollar hedge funds)\u00a0 flooding the crypto-market and engaging in get-rich-quick schemes (pump and dump basically).<\/p>\n
<\/p>\n
It\u2019s true that a large part of crypto wealth is in the hands of legitimate, long-term thinking investors, who are trying to make a positive impact on the world. However, when it comes to crypto, there\u2019s always the threat of civil war, like the recent adoption of Bitcoin Cash and various forks, which are eroding crypto valuation, market share and adoption.<\/p>\n
<\/p>\n
Another problem is that large crypto holders, called whales, have a disproportionate amount of influence over the crypto market, as they are definitely capable of affecting price fluctuation and things of that nature; and despite the libertarian utopian talk about a future world with no central authorities and ruled by blind scalable trust, the big fish always eats the little fish in the real world, especially when it comes to crypto.<\/p>\n
<\/p>\n
Hence, state actors are faced with a difficult challenge when it comes to regulating cryptocurrency: first, they must properly classify the range of crypto in existence, and many analysts regard crypto as an entirely different (as in new) asset class.<\/p>\n
<\/p>\n
This is definitely true when it comes to utility tokens, and somewhat true for tokens that function like securities.<\/p>\n
<\/p>\n
To clear things up, utility tokens are described as having intrinsic utility besides being valuable as an investment vehicle, and the argument for supporting utility tokens is that they don\u2019t qualify as securities under the Howey Test, i.e. they don\u2019t qualify as a common enterprise with an expectation of profits predominantly from the efforts of others.<\/p>\n
<\/p>\n
\u201cGray\u201d taxes<\/strong><\/h3>\n <\/p>\n
The concept of gray taxes in regard to cryptocurrency revolves around crypto exchanges. Basically, instead of having to deal with the blockchain themselves, everyday consumers usually buy and sell crypto via cryptocurrency exchanges.<\/p>\n
<\/p>\n
As we already told you, digital assets are stored on blockchains, but cryptocurrency exchanges are designed to make the process easier for everyday users.\u00a0 All you have to do is to log into a crypto-exchange of your choice, and with just a few clicks, you\u2019ll be able to purchase or buy crypto in a matter of minutes. This is yet another example of DeFi making people\u2019s lives easier.<\/p>\n
<\/p>\n
Cryptocurrency exchanges operate on blockhain obviously, and by its sheer nature, blockchain is synonymous with privacy and anonymity, i.e. you will be able to send crypto into your exchange account from locations outside of the exchange\u2019s own network.<\/p>\n
<\/p>\n
To make things clear for people unfamiliar with the concept, you can buy crypto on a particular exchange, let\u2019s say Kraken for the sake of argument, and then\u00a0 transfer the crypto you just bought to another exchange, like Coinbase, from where you can withdraw your money in fiat currency (USD).\u00a0 This happens often in the crypto-world, and it is actually the whole premise of using crypto, i.e. being able to send cryptocurrency from one wallet to another, and\/or to other location without requiring third party verification, and, most importantly, without having to pay taxes.<\/p>\n
<\/p>\n
And that\u2019s actually the main issue with crypto: a massive tax problem for state actors.<\/p>\n
High asset volatility<\/h3>\n
<\/p>\n
If you\u2019d have to describe crypto investing, the best word would be volatility, as in asset volatility, which is due to speculation and lack of regulation.<\/p>\n
<\/p>\n
Volatility is great for speculators (whales), and according to some, vital for the growth and interest in crypto, but not so great for regular people trying to hedge their fortune from inflation, provided the price of a particular cryptocurrency they\u2019re invested in takes a dive.<\/p>\n
<\/p>\n
Volatility may also mean that cryptocurrencies have failed in their main task, i.e. to provide a viable alternative to the banking system as a \u201cdemocratic\u201d digital currency, because you can\u2019t have price discovery with any particular cryptocurrency if the value of the respective crypto goes up and down on a daily basis.<\/p>\n
<\/p>\n
Simply put, volatility is the enemy of crypto functionality and widespread adoption, and that\u2019s mainly due to market manipulation.<\/p>\n
Market manipulation<\/h3>\n
<\/p>\n
According to Investing 101, you should never take risks with money you\u2019re not prepared to lose, but what\u2019s happening in the crypto market nowadays is taking that concept to another level.\u00a0 As in, the crypto market is heavily influenced by misinformation that spreads through social media like wildfire, and it\u2019s prone to social engineering, like Elon Musk or Donald Trump tweeting about Bitcoin or Dogecoin.<\/p>\n
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People unfamiliar with the crypto space are an easy target for fraudsters, market manipulators, cyber extortionists and so on. In order to draw awareness, the U.S. Securities and Exchange Commission (SEC) went so far as to create a fake initial coin offering website, aimed at educating would be crypto investors about scams and, let\u2019s say shiny objects threats.<\/p>\n
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The SEC taking interest in educating investors on the risks of cryptocurrencies is long overdue, and we definitely require emerging regulatory clarity on what makes for a truly decentralized crypto asset, like Bitcoin or Ethereum, which cannot be controlled by any single actor, vs. company (or state) issued crypto like Facebook\u2019s Libra.<\/p>\n
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Speaking of misinformation and market manipulation in the relatively small yet highly speculative crypto market, we must mention the massive impact of the media, whose headlines may make or break the crypto market at any given moment.<\/p>\n
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Investors and speculators alike are literally hunting news headlines for the next big \u201cevent\u201d that has the potential of influencing the markets, up or down. Any news item that may impact crypto prices leads to a race to sell or buy fast, as the quickest to do so will profit the most, and the truth is that media stories have a disproportionate impact over the crypto market.<\/p>\n
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Also, the fact that there are many fake news outlets influencing people\u2019s investing decisions in crypto doesn\u2019t help things much in regard to market manipulation.<\/p>\n
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4 Latest Blockchain Tech (2-3 pages)<\/h2>\n
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The current DeFi\/blockchain paradigm is arguably the merit of Bitcoin, as it was first introduced as a cryptocurrency back in 2008 and it definitely changed the world for the better. Blockchain and crypto were revolutionary innovations when first introduced more than a decade ago, and these experimental technologies have come a long way since.<\/p>\n
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We can safely affirm that 2020 was the year that cemented Bitcoin\u2019s position as the dominant cryptocurrency of the world, as a solid and trustworthy technology. Moreover, the Covid-19 pandemic further empowered the role of blockchain and crypto and contributed to their mass adoption, as many individuals and businesses were exploring for alternative means to transfer money abroad, and\/or keep their business afloat.<\/p>\n
During the pandemic, blockchain came in handy as an already established technology, and offered comprehensive solutions to existing businesses, as well as start-ups and individuals.<\/p>\n
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Permissioned Blockchain on the Rise<\/strong><\/p>\n <\/p>\n
If you\u2019re into crypto, you\u2019re probably familiar with distributed ledger technology, and, most importantly, Public blockchain.\u00a0 The next layer though is the permissioned blockchains, which can only be accessed by specific users only, and offer reliability and efficiency via a private key for accessing authorized nodes.<\/p>\n
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Permissioned blockchains have gained significant momentum in 2021, as they\u2019ve become a significant contributor\u00a0 to overall\u00a0 crypto\/blockchain market growth. This particular type of blockchain is specifically aimed at enterprises\/organizations and not so much at private individuals, as it offers a unique solution for business users to leverage blockchain technology to suit their particular requirements\/interests.<\/p>\n
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DeFi Adoption on the Rise<\/strong><\/p>\n <\/p>\n
In the aftermath of the covid-19 pandemic, the world has changed in many ways, and that includes DeFi. Prior to 2021, there has been a good amount of skepticism in regard to mass adoption of decentralized financial transactions, but in 2021, things changed dramatically, as millions of people have been exposed to cryptocurrency and had the opportunity of becoming investors from the (forced) comfort of their own homes.<\/p>\n
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Many people did so, i.e. they invested in crypto and DeFi related technologies, as DeFi transactions were slowly gaining traction compared to regular banking. And one of the biggest winners in terms winning the hearts and minds of users in 2021 is DeFi lending platforms<\/p>\n
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Supply Chain Optimization<\/strong><\/p>\n <\/p>\n
Supply chain optimization is a familiar term for people involved in businesses that transact internationally, like dropshipping. Optimizing the supply chain is relatively difficult even for experienced entrepreneurs, especially in terms of logistics and\/or the flow of goods and services.<\/p>\n
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Daily operations involve a ton of paperwork, bureaucracy and headaches, but fortunately, blockchain offers comprehensive solutions to all supply chain optimization problems, including the painstakingly slow traditional clearing process. Complex international transactions and trades on blockchain powered platforms can be optimally recorded digitally, and documented on a distributed ledger, regardless of the volume of data, and that includes logistics and technical processes.<\/p>\n
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Blockchain\/distributed ledger technology makes for the perfect solution to all businesses that transact internationally, as all the details of each transaction are recorded and made available to every party involved in the respective transaction, and there\u2019s no limit to recording and storing any amount of data.<\/p>\n
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Mass Adoption of Blockchain as a Service (BaaS)<\/strong><\/p>\n <\/p>\n
Another DeFi service gaining more acceptance this year is BaaS, as numerous enterprises already integrated blockchain as a service into their daily operations.\u00a0 Blockchain as a service is pretty similar to a web hosting provider, i.e. it\u2019s basically a cloud based service that allows the development of digital products by working with blockchain. With Baas, enterprise services or operations can integrated blockchain technology into their system.<\/p>\n
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Influence in Social Networking<\/strong><\/p>\n <\/p>\n
As per April 2021 figures, 4.33 billion people are using social media, which means social media is an intrinsic part of the human life. According to various experts and\/or enthusiasts, we can expect for blockhain technology to become embedded in new social networks.<\/p>\n
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The advantages of building a blockchain powered\u00a0 decentralized social network include better data privacy and full control over content and personal data by users, content relevance without biased search algorithms, and basically all advantages offered by blockchain, including end-to-end encryption and things of that nature.<\/p>\n
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Hybrid Blockchains<\/strong><\/p>\n <\/p>\n
The concept of hybrid blockchain is relatively new, and to define it succinctly, it makes for a combination of public and private entities. A hybrid blockchain merges the benefits of both private and public systems in order to offer both freedom and controlled access at the same time.<\/p>\n
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One big advantage of hybrid blockchains is that they are cheaper to set-up and operate, and due to their influential nodes, verifying transactions is quick and easy. Since hybrid blockchains are secured, hacking is not an issue, and we can expect for hybrid blockchains to be the next big thing with the emergence of new cryptocurrencies in 2021.<\/p>\n
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5 Insufficiency of current Money<\/h2>\n
The Keynesian fiat-based modern monetary system is highly inflationary, and has a lot of problem, including economic, environmental and social consequences, including a debt based economy with public and private debt at historic highs, high house prices, income inequality, environmental problems, periodic booms and busts, depressions\/financial crises, not to mention debt deflation and negative consequences for investment, economic growth and the labor market.<\/p>\n
These are the main effects of the modern monetary system over income inequality, house prices, debt, the environment, recessions and crises, the level of democracy, jobs, businesses, taxes and public spending:<\/p>\n
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Debt<\/h3>\n
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In the current monetary system, money is created as debt by central banks as well as private lending institutions via fractional reserve banking. Which means the entire system is a perpetual debt trap, leaving both individuals and companies beholden to banks in perpetuity.<\/p>\n
Inequality<\/h3>\n
<\/p>\n
Since all money in circulation is issued as debt, we end up with a system that required perpetual debt, i.e. the level of debt is always raising. The interest that has to be paid on the debt exacerbates inequality, as it makes for a massive transfer of wealth from the 90 percent of the population (by income) to the top 10 percent.<\/p>\n
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Financial Crisis & Recessions<\/h3>\n
<\/p>\n
Most financial crises, including the recent one in 2008, are the result of too much money printing by banks, which creates an asset bubble, whether it\u2019s speculation in the financial markets or increased house prices. As we already explained, each time a loan is made by a bank, new money goes into circulation as debt, and that\u2019s how banks are fueling emerging financial crisis by making loans and creating huge sums of new money.<\/p>\n
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Environment<\/h3>\n
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The economic paradigm of the modern world is endless consumerism with no regard for the environment, and this economic system is highly detrimental in terms of environmental destruction via accelerated resource consumption (deforestations etc.). This should be viewed as constructive criticism, as we do not claim to have all the answers, yet we must acknowledge there\u2019s a problem with the current system.<\/p>\n
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Jobs & Business<\/h3>\n
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The current system works by pumping money into the economy via personal debt, in the form of credit card and\/or personal debt. The apparent economic prosperity created by people spending more on money they don\u2019t have encourages businesses to hire more people and expand, but since these consumer-led booms are actually based on debt not on increased income, recession occurs with mathematical precision, people lose their jobs and businesses go bankrupt.<\/p>\n
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Needless to say, the modern money mechanics is bad for both businesses and jobs creation.<\/p>\n
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Democracy<\/h3>\n
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The current system blames all economic and social issues on politicians, yet the truth is that the banking sector has more power than governments, as banks are the ones that create money (you can use the Rothschild quote: “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls the British money supply controls the British Empire, and I control the British money supply.”).<\/p>\n
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Taxes & Public Spending<\/h3>\n
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If you allow private banks to control a nation\u2019s money supply, you\u2019ll end up with everyone paying more taxes, and that\u2019s built-in the system; as in, it\u2019s a feature, not a bug. More precisely, banks are the ones profiting from the newly created money, while the taxpayers are left holding the bag, as they\u2019re ethe ones that have to pay the costs of the impending financial crises (too big to fail etc.), which are created by the banks in the first place.<\/p>\n
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<\/p>\n","protected":false},"excerpt":{"rendered":"
The digital landscape is evolving constantly, as once \u201cexotic\u201d technologies are becoming mainstream and their impact is obvious in nearly all aspects of our lives, ranging from how we shop to dating. However, as expected, businesses and especially banking and finance have been the most affected by so-called \u201cdisruptive\u201d technologies. Disruptive is a good word […]<\/p>\n","protected":false},"author":7,"featured_media":3347,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"Exploring the Impact of FinTech and Digital Banking on the Financial Sector","_seopress_titles_desc":"Discover the impact of FinTech and digital banking on the financial sector. Learn how technology is transforming the industry and improving customer experiences.","_seopress_robots_index":"","tdm_status":"","tdm_grid_status":"","footnotes":""},"categories":[162],"tags":[311,967,310,966,968],"_links":{"self":[{"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/posts\/3346"}],"collection":[{"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/comments?post=3346"}],"version-history":[{"count":3,"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/posts\/3346\/revisions"}],"predecessor-version":[{"id":7249,"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/posts\/3346\/revisions\/7249"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/media\/3347"}],"wp:attachment":[{"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/media?parent=3346"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/categories?post=3346"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businessner.com\/wp-json\/wp\/v2\/tags?post=3346"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}