"Fix the Fiat!" A rallying cry for cryptocurrency (crypto) enthusiasts and purveyors of broken-down Italian Auto, alike.
With a cheeky grin now on your face, you may be asking, "What Fiat?" Well, with growing concern about traditional money, due to the significant amount of American money rapidly printed in response to the COVID-19 pandemic, many individual investors are looking for protection against hyperinflation and other financially derived problems with society.
Hyperinflation is when fiat currency (or, what the government calls money) is printed at such an overwhelming rate in a short time span. The result is this money rapidly losing nearly all of its effective value or purchasing power. If you're wondering, "Has this actually happened before?" Look no further than post-WWI Germany, Mugabe's Zimbabwe, or Maduro's Venezuela. Even if not taken to such extremes, the concern of at least some degree of heightened fiat devaluation is not misguided.
The year is 2009 - enter Bitcoin, a deflationary cryptocurrency, built using accountable, digitally-recorded, blockchain technology - the brainchild of enigmatic individual/group Satoshi Nakamoto. In the midst of the 2008 financial collapse, this the people's answer to the reckless behavior of traditional finance institutions. With a hard supply cap eventually approaching 21 million, Bitcoin presents itself as a safeguard against this boom-and-bust rollercoaster of our financial system.
Fast-forward through a dozen years of early-stage volatility, critics vs. fanatics, and increasing political polarization: Crypto, today, is increasingly part of the investing for individuals of newer generations, especially as these individuals have time for these volatile, aggressive asset portfolios have time to grow.
In fact, smartphone apps like SoFi, itself a catchy acronym for Social Finance, is a financial technology (FinTech) helping introduce users to new, cutting edge technologies. The most notable application of decentralized finance (DeFi) technology? Investing in crypto. Most recently, at the 2021 Bitcoin Conference in Miami, Florida, Twitter CEO Jack Dorsey spoke of how we as a society can move past the traditional, centralized banking system, and into the world of DeFi, spearheaded, of course, by the world's original cryptocurrency, Bitcoin.
This distrust of central banks and central power is nothing new. In fact, it's a revolutionary tenet of George Washington's establishment of the United States - a counter-culture breakaway from British Bureaucracy. Now, in the modern era, crypto's relationship to DeFi, is analogous to what credit cards have become for personal finance.
However, with this unprecedented decentralization, crypto is very much still the proverbial wild west of finance. A case in point, the present lack of the common $250,000 in FDIC insurance, guaranteed to individuals whose securities in stock brokerages collapse. The onus is therefore on us, the users - especially now, as early adopters - to thoroughly understand the DeFi applications we use, and likewise safeguard our crypto investment portfolios, passwords, and hardware, just as we would any other physical asset.
While crypto is very much still a developing, emergent trend in 2021 finance, as Jon Stokes highlights, those out-of-the-loop on crypto and DeFi are being made increasingly aware of its presence; the proverbial pendulum is shifting from on-site institutions and stale bureaucracy to a decentralized lifestyle, workforce, and set of individually-customizable opportunities. (Source: https://1729.com/crypto-for-people-who-dont-follow-crypto)
Further, as obsolete institutions fade, volatility-weathering blockchain innovation will mitigate cultural inertia and apprehension, giving way to exciting new opportunities. Undoubtedly, Stokes' assessment of this decentralization of finance is spot-on: crypto and DeFi will continue leading the reform of our global financial systems.
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