What Cryptocurrencies Represent? - A Ticket to a New Kind of Economy
Many people are still unaware of a new kind of economy which is on the horizon. That is because this new economy is drastically different from the traditional one we are used to. In this article, I am going to explore 2 main economies that cryptocurrencies are bringing to us and how one can only participate if you have the "ticket" to do so.
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Decentralized Finance
I have been talking about decentralized finance (DeFi) for a while now and the most recent article I wrote dedicated to DeFi was a month ago. The reason why I kept returning to this topic is because I see DeFi as something that is going to radically change the existing financial system.
Some believe that Bitcoin is here to challenge the central banks and fiat currencies. If that is the case, then DeFi projects are here to challenge the existing financial institutions such as banks, insurance companies and investment funds.
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Open and Permissionless
The key selling points of DeFi is that it is open and permissionless. Now let's take a look at the existing financial system. When you want to participate in the existing financial system, for instance you want to take up quick cashline, you go to a bank. The bank will scrutinize your credit score, employment history and some other personal details before accepting you as a client.
DeFi is built on an entire different paradigm. You do not need any permission from a centralized entity to participate in DeFi. You just need a "ticket" and this ticket is basically the cryptocurrency of the related platform. At this point, Ethereum is the leader in DeFi platforms and you just need some ETH to take part. DeFi is still at its infancy but there are already a number of things you can.
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First, you can swap your money into DAI, a stablecoin pegged to USD, and put it into a smart contract to earn you 6% interest per annum. You can also take up some loans in DAI by using cryptocurrencies such as ETH and BAT as collateral.
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I know it is tough in certain places, with strict capital controls, to invest in stocks of foreign countries. For instance, it is extremely difficult for people living in Vietnam to invest in the US stock market. Soon there will DeFi solutions to enable that. Synthetix is one of such examples as it will soon allow US stocks like Apple and Tesla to be traded on their platform. All you need to do is own a "ticket", in this case SNX, the native token on the Synthetix platform.
Decentralized Attention Economy
The concept of attention economy is probably popularized since the rise of social networks such as Facebook. However, this concept is not new. Humans all have a limited amount of time per day but we are not always using all our time for work. While we are not working, we spend our attention or time doing something else.
Decades ago, there was already Televisions. Centuries ago, we had printing press. And even further back, there were manually written content for people to spend their attention on. Those were the "attention economy" back then. They were not as huge as what we have today because technology now allows companies to capture people's attention much more efficiently and effectively. With the advancement of technology, we can consume content even more. One may even argue that with automation and AI gradually removing the need for manual work, we are getting more time to "contribute" to this attention economy.
Value back to the consumers
As we spend our precious attention (i.e. time) on content, we contribute to the attention economy. Advertisements are shown to us as we read an article, scroll through Facebook and/or watch a video. At the end of it, someone gets rewarded for our attention spent. That someone is usually a big tech company (e.g. Google, Facebook and etc).
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The decentralized attention economy is changing this by sharing the rewards to consumers as well. For example, Basic Attention Token (BAT) allows their users to earn by viewing the advertisements they provide. All you have to do is to install a free browser and you can start earning. All these is enabled by BAT, a cryptocurrency acting as a ticket to this new kind of economy.
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Steem is another example of decentralized attention economy. The content creators are rewarded for their work while the content consumer also gain in curation rewards by reading and voting. Imagine this concept being applied to a bigger social network such as Facebook. Every "like" and comment can potentially yield some rewards (with Facebook sharing their revenue to users). Wouldn't that be a much fairer system? Steem is not perfect, but it is one step closer to this fair system where users can be rewarded for spending resources (in this case time) on a platform.
Conclusion
DeFi and attention economy are not the only use cases for cryptocurrencies. There can be more and I am pretty sure there will be more in the future. Such economies embrace the opposite of centralization and that is why a decentralized, open and permissionless system is needed to enable them. Cryptocurrencies serve as "tickets" to such alternate economies and to participate, you need them and there is no other way around it. So have you bought your tickets?
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This article is created on the Steem blockchain. Check this series of posts to learn more about writing on an immutable and censorship-resistant content platform:
- What is Steem? - My Interpretation
- Steem Thoughts - Traditional Apps vs Steem Apps
- Steem Thoughts - A Fat or Thin Protocol?
- Steem Thoughts - There is Inequitable Value Between Users and Apps
- Make my votes count! Use Dustsweeper!
- What caused STEEM to get dumped? Why I think the worst might be over
- Steem 2020 is about having a "SMART U"
Good morning @culgin
Now question I have - how can regulatory framework affect DeFi? DeFi seem to be "an enemy" to existing financial system and that may not be easy battle.
All those steps are the reasons why majority of people have some trust towards banks. DeFi may be the future, but we need to wait at least till new generation of users. Current bank customers will probably not be interested with this overcomplicated technology and DeFi will most likely enjoy popularity only between early-adopters. That's just how I see it at the moment.
Another interesting read. Upvote on the way :)
Yours, Piotr
The question will be, how can regulators enforce their rules on a decentralized network? 😉
Even decentralized network will have some centralized parts.
Just like Steem: as a blockchain it's decentralized, but you can go after all front-ends that are large enough to attract attention.
Anyway, that's a solid question.
Cheers, Piotr
That's true. But when something is big enough and when the stake is high enough, there will be plenty of people willing to provide these "centralized" components
Furthermore, regulators are often slow to the game. By the time DeFi is big enough to attract their attention, they probably cant do much about it anymore
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STOPTo support your work, I also upvoted your post!
Congrats! on your upvotes from the IBT Community
Thank you @culgin for the good explanation you give and why a ticket is needed
Re-steemed
Hello dear @culgin.
I must confess that it was thanks to you that I began to be interested in the term DeFi.
Now with great enthusiasm I can see that you are paying attention to BAT. Personally I must admit that from the beginning I was captivated with the whole concept behind Brave Browser and his BAT.
Wow!
A blunt example.
Happy 2020!
Your friend, Juan.