Article Contributed by Anderson McCutcheon, CEO of Chains.com
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Investment opportunities like never seen before
Most capital held by the public is either un-utilized or grossly underutilized. Those considered to be high income households in the US spend less than 70% of their income on basic needs yet, although there has been a positive shift, many are not employing their extra money into stocks.
People are actually losing out to inflation with their savings accounts and are effectively paying the banks for holding (and using) their funds. For many, taking on risk however marginal requires a cultural shift from save-and-hold practices passed on through generations.
Research shows millennials are increasing their market share of stocks: in Q1 2020 they owned 1.8% of stocks and in Q2 2021 they accounted for 2.5% at a value of $1 trillion. Analysts suggest this might be due to them reaching their peak earning potential.
For Gen Z investors, the trend is not so pronounced, despite the fact their income is usually mostly their own. It is yet to be seen if their investing habits can be expected to carry through to later years.
But while the market remains inefficient banks can continue to charge clients for the assets they hold with them. People don’t have access to complete information and lack knowledge of the range of financial tools they can use to improve their wealth.
All the liquid currency people hold can be used for the purpose of issuing loans or staked in yield generating or appreciating assets. Currently, people do not have access to the right financial tools and opportunities. With cryptocurrencies, however, they not only offer price appreciation but can be used on many platforms to generate yield through mechanisms such as staking.
This is a potential gateway to financial services for the masses without the built-in barriers to certain investment methods. An investment in cryptocurrency doesn’t grease the wheels of a giant institution, so to speak, but instead represents a march to financial freedom and independence.
Because people are not otherwise given access to the right financial tools and opportunities. The market is clearly inefficient, and this is why banks can charge clients for the assets they hold with them.
The year 2020 has been the best year on record for virtually anyone with access to venture capital, private equity, crypto or real estate. In 2020 this happened:
- Since the March low, the S&P 500 recorded a 65% surge and finished the year around 15% up, underlining the role of the stock market as a forward looking mechanism at the same time it starkened the divide between those who invest and those who don’t.
- Americans earned over $4 billion from Bitcoin alone over the year while Ethereum saw a 337% increase until December, showing cryptocurrencies have emerged as an asset class which will broadly follow the stock market and thus offer a good store of value.
- Housing in the United States meanwhile gained around $2.5 trillion in value in the best year since 2005 as investors flocked to an age-old safe place to put their money.
Simply put, while investors rejoiced, it was a terrible year for those who don’t have access to appreciating assets, as inflation skyrocketed due to… well basically everybody printing money.
Fractionalized currencies and the emergence of non-fungible tokens representing rights, assets and mechanisms provides boundless potential in helping the public to better deploy their capital. Decentralization here is a way to democratize access to financial opportunities, which up until now were available only to high net worth individuals.
DeFi to create a new paradigm
Decentralized finance, or DeFi, has brought institutional-grade financial products to the masses, pertinently anonymous masses. For better or worse, code is law, and if you know how to interact with the products available then you have access to derivatives, loans, exchanges, synthetic assets, DAOs, virtual funds and everything in between.
What this means is complex financial products which were previously only available to sophisticated investors are now open for all to see and use. This is already a financial revolution that is yet to reach its full potential. We are moving towards a flatter world where the traditional middlemen and barriers to financially literate retail investors are removed, so the public can use their time and money in a way up until very recently was available only to the most sophisticated and wealthy investors.
It’s in the best interest of the market and us, as humanity, to allow as many participants as possible to take part in the game. Right now, there are barriers not only caused by regulation, but technology and quality of the products that we expect people to interact with. We need to give people a spectrum of products that are designed for different levels of proficiency.
Once we do that, we will see a true democratization of financial markets and products in the cryptocurrency space.
Utility and Corporate-issued Cryptocurrencies
Every for-profit entity of sufficient size and complexity can be considered an economy of its own. With a governance structure (usually a meritocratic oligarchy of sorts), budgets, production, import and export functions, permanent and temporary participants and its own rules of conduct. It’s unsurprising then, that in 2017 we saw a surge in companies trying to issue their own currencies. Most have failed, mostly because they’ve misappropriated the funds, but many have turned their own currency into an integral part of the product and surrounding economy. Binance, Crypto.com, Axie Infinity, FTX, in varying degrees, have issued currencies that are an integral part of their product ecosystem.
With the exception of Facebook, companies who weren’t “born” into the crypto ecosystem have been very reluctant to issue their own currency, and understandably so. Even today, the regulatory frameworks are moot, and operating a cryptocurrency enabled product introduces a lot of complexity, which may outweigh the benefits for most companies.
What if the situation were to change and megacorporations were given a clear framework that allows them to issue cryptocurrencies, and these would carry utility for those who hold and use them when interacting with the product? The short answer is – currencies with billions of users are likely to trump government-issued currencies, especially when it comes to anything related to international transactions.
This is where cryptocurrencies hold the most potential to disrupt existing systems and create a new paradigm for users to interact with a platform. Features already used by people can be subject to a global economy with the addition of novel and exciting ways to exchange value for products or services.
We may see an entirely different type of platform emerge, although through companies we are already familiar with: one which focuses on the easy exchange of currency across borders and provides people across the world with the opportunity to earn, trade and interact in ways never seen before.
The future of cryptocurrency could largely derive from this phenomenon wherein people simply adopt because it is convenient to use a token when it enhances the experience of features on a platform they already use. Where it goes from there is anyone’s guess, but the sky’s the limit when it comes to transacting on a global scale while incurring minimal fees.
It could be a matter of time before megacorporations other than Facebook take a serious look at cryptocurrencies as the future of their platform. What it offers users is a far more seamless and versatile product, while corporations can seize upon the chance to firmly entrench their on-platform economies and ensure people spend more money within the ecosystem.
Article Contributed by Anderson McCutcheon, CEO of Chains.com
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Bio: Anderson Mccutcheon is founder and CEO of Chains.com, an operating system for the cryptocurrency-enabled economy. Anderson is building a full-stack crypto-economy consisting of a marketplace, freelance platform, and cryptocurrency exchange. He is also an investor and entrepreneur with an interdisciplinary technological and marketing background and a long history in the crypto space. A blockchain industry pioneer and an 8200 alumnus, he has founded Unicoin, Synereo (later HyperSpace), and is currently leading Chains.com.