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The Fast Company Executive Board is a private, fee-based network of influential leaders, experts, executives, and entrepreneurs who share their insights with our audience.

How Blockchain can become the financial system the world needs

Blockchains and DeFi technology have the power to transform lives, but there’s still a long journey ahead for the industry.

How Blockchain can become the financial system the world needs
[Friends Stock / Adobe Stock]

The modern financial system is usually traced back to the Bretton Woods accords, which were negotiated in the shadow of World War II. It was a system designed for great power politics to solidify alliances and prevent another World War through shared financial incentives. Beginning with the financial crisis of 2008, and again after 2020, global leaders have called for a second Bretton Woods. But in the blockchain industry, we think that moment already happened when Satoshi Nakamoto published the Bitcoin whitepaper in 2008.

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If we are going to create a new system that banks the unbanked, works across borders, and treats everyone fairly, it needs to come from the ground up. We can’t rely on great power politics in the modern era—businesses and individuals need access to an open system with clearly defined rules and logic that they can understand and trust.

Public blockchains, like Bitcoin and Ethereum, are the first truly fair and open global financial system that’s proven to be safe and effective for trillions of dollars worth of transactions across every nation in the world. The next phase of this evolution is decentralized finance (DeFi) technology—rebuilding banking functions like lending, borrowing, and market-making as smart contracts that anyone can use.

Blockchain provides people the exact same data, access, and speed, regardless of where they live in the world. Unlike most online services, which tend to work better the closer you are to Silicon Valley, blockchain technology works exactly the same in San Francisco, California, as in Kandahar, Afghanistan. Compare this to the old system, where a lack of trust and transparency makes transactions expensive and slow, requiring a complex web of banks, regulators, law firms, accountants, and insurance companies to simply enforce a ledger of who owns what. This system was designed around the needs of the people with the most money to lose and often locks the average consumer out of the best investments and highest returns.

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Blockchains are public ledgers that anyone can use, and everyone can trust. The cryptocurrencies that use these public blockchains are leading to the creation of an alternative financial system that could be leaner, safer, and more efficient. A system that allows savings, investment, peer-to-peer micropayments, and lending—that could one day enable financial inclusiveness for billions of under- and unbanked people for the first time. The new system is created by people, for people, and links our shared interests across borders, parties, and political systems.

SECURE MONEY IN AN INSECURE WORLD

Two years ago, I met a female entrepreneur from Afghanistan who explained that “having Bitcoin was the first time women in my country could own money that the men in their families didn’t know about.” The idea of digital gold that couldn’t be found, in a wallet that she didn’t need anyone’s permission to use, was revolutionary.

A couple of years later, I met Syrian refugees in London through the charity Refugees at Home. I helped them set up their first Bitcoin wallets and warned them that whoever saw their seed phrase (12 random words used as private key) could steal their Bitcoin.

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Thirty seconds later, one of the refugees asked me, “If I gave my relatives in Syria the seed phrase, would they have access to this Bitcoin?” Of course. This is probably the easiest and safest way humanity ever devised to get money into a war zone.

These are dramatic examples, and probably not very relevant to most of the readers of this article, but DeFi has a lot to offer rich nations (and rich people) as well. Better interest rates, faster clearing and settlement for stocks, access to high upside investments for non-accredited investors, more transparency, and clear rules can benefit everyone. For example, you might deposit $10,000 into a traditional bank savings account and earn a laughable 0.01% interest, while the bank is lending your money and earning for itself maybe 5% or 6% interest on anything from auto loans to mortgages. In DeFi, the smart contract takes only a tiny portion of the interest, allowing the providers of capital (like you) to capture almost all of the gains, which can be hundreds of times the current yield from a traditional savings account.

THE PATH FORWARD

Blockchains and DeFi technology have the power to transform lives, but there’s still a long journey ahead for the industry. Today, the blockchain user experience is confusing and intimidating, and there are a variety of pitfalls that new users can fall into. Casual users often lose their keys, expose their private keys to hackers, or end up sending tokens to scam projects. To overcome these hurdles, we need industry leaders to integrate these revolutionary new technologies into tried and true applications that users already understand. Existing apps can integrate curated lists of approved projects, manage key security, and handle password resets. Once we’ve solved these usability hurdles, we can connect billions more people around the globe to financial opportunities they’ve never had before.

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Marc Blinder, founder & CEO at AIKON and core contributor to the ORE Blockchain.

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