[ad_1]
Where crypto stands now
Although it has been only 14 years since its dawn, crypto is experiencing a full-blown midlife crisis. Thanks to Sam Bankman-Fried and the collapse of FTX, which used to be one of the largest crypto exchanges in the world, trust is at an all-time low in both assets and the people behind them.
Once lauded in the global media as an altruistic leader trying to make money not for himself but rather for egalitarian causes, Sam Bankman-Fried turned out to be nothing more than a fraud. He managed to scam investors out of approximately $16 billion dollars. Because so many people were quick to throw their money at him, without a good understanding of what his business actually was, and the lack of clear legal regulations and oversight, he was able to recklessly misuse all of the funds that he had amassed.
Con artists, scammers, grifters and other bad actors like SBF have come to dominate the public’s perception of the industry. On the surface, they have turned the space into a goldrush. Many people who are not interested in the true value of digital assets have been rushing to get involved and speculate about the price they can sell them for, and not for what the assets represent or are actually capable of.
But this poor perception is only half-justified. People come and go — some with an unceremonious exit — but blockchain technology is here to stay, and it is only just starting to catch on. As bad actors like SBF leave, the entire industry can cleanse itself and take a huge leap forward to pioneer solutions to the problems it initially set out to solve.
Considering the fundamentals of crypto and blockchain, ironically, this low level of “trust” is actually ideal. It is the issue the original architects of, for example, bitcoin sought to solve over a decade ago: how to fully prevent tampering by any single person or group with common control, while facilitating total transparency and financial freedom.
Blockchain removes the element of human flaws and automatically verifies everything through secure, cryptographic computer algorithms. Despite the recent catastrophe in the industry, there is now a momentum to move toward a truly decentralized future, unlocking the technology’s true potential.
What blockchain really stands for
The word “blockchain” has become a buzzword both in business and in popular culture over the last few years. Since bitcoin first broke into the mainstream, cryptocurrencies and their underlying technology have become a mystifying phenomenon to many, but a world-changing technology for others. From Non-Fungible Tokens to Game Finance, Decentralized Finance, Centralized Finance and a whole lot of other jargon, the technological foundation of the industry is getting buried under both hype and speculation.
Blockchain technology is revolutionary to the core for many reasons. But, perhaps most profoundly, it is paradigm-changing in its ability to bring financial institutions into the future: making banking cheaper, faster, and more efficient.
The way we communicate, dine, shop, and even work have all been drastically transformed by technological change in only a few decades. However, technology is severely lacking when it comes to our money and the way in which we exchange value. Unless you are using cash, which is severely limited by its physical properties, instant transfers of value are still unavailable for most people.
Applications like Venmo, Cash App, Revolut, N26, and a whole host of other financial technology services may look like instant transfers. In fact, they are not. Try to spend that value using your debit card. The money is not available unless the debit card is from one of these service providers. And even then, that value you are spending is actually their credit, not from your bank account.
You do not truly have ownership over your money unless you transfer it to your bank — which takes days, unless you are willing to deal with costly friction in the form of a $0.25 to $25 fee and a 30+ minute wait time.
Even at the most elementary level, modern banking is defined by friction and credit. They are two ways in which the banking system derives much of its profit from its customers. Where this friction can be most acutely observed, is in the foreign exchange (or FX) market and international transactions sector of banking. Utilizing the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, which is essentially a messaging network that connects banks across the world, banks are able to bounce customers’ transactions across borders from bank to bank until that transaction settles in its destination. Along the multi-legged journey that this transfer of value takes over the course of multiple days, each bank happily takes their own slice of each transfer.
Blockchain speeds up and smooths out this process by cutting out the many middlemen. Blockchains are secure, immutable and trustless ledgers built on cryptographic rails that track these transactions across their decentralized global network in seconds with fees as low as fractions of a penny. This is an astounding contrast to traditional finance’s SWIFT system. Using blockchain technology, users can transfer value, not credit, instantly around the globe for less than pennies on the dollar, without any middleman.
You can send text messages, photos, documents and files instantly to anybody’s device across the globe in seconds, why shouldn’t you be able do the same with your money?
Blockchain technology is the answer to this question. With it, now you can.
Where we go from here: out with the Bankmans, in with the builders
FTX’s crash, which left likely more than a million people worldwide scrambling for their money, is a shame that the crypto industry will have to live with. But now it is imperative for good actors, futurists, and technologists to learn from this tragic mistake, step up, and make clear the true purpose of this revolution.
The rebuilding starts with legal regulation and compliance. For too long, a considerable part of the crypto community rejected lawmakers’ involvement — seeing it as yet another encroachment of a monopolistic, centralized middleman: the government. The FTX collapse shows that there must be clear and fair basic rules, and that regulation from democratic governments, communities (whether on-chain or off-chain) is nothing to fear. The industry must do its utmost to help create, and comply with rules designed to create fair competition and consumer protection so that we would not have to deal with events like the ones that marked crypto in 2022.
This is the moment and the once-in-a-lifetime chance for the blockchain community to come clean and give way to builders and innovators, creating new, smart, convenient, and efficient solutions to real-life problems. The industry must move away from pump-and-dump speculation and hype to the responsible, right direction, delivering on the true promise of blockchain technology: the revolution of transparency and accountability that facilitates a more equitable, efficient, and inclusive global economy.
By Guilhem Chaumont, Co-Founder and CEO of Flowdesk, a regulated Paris-based crypto custodial market-maker
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
[ad_2]
Image and article originally from www.nasdaq.com. Read the original article here.