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DeFi and Cryptocurrencies In Modern Economy

A detailed dive into how cryptocurrency and DeFi are impacting the global economy, reducing global inequality, and supporting traditional financial institutions

Cryptocurrency: The Great Equalizer

Cryptocurrency was created by a mysterious figure who preferred to remain anonymous, even though they could have soaked in the fame and celebrity that would have come with the invention of one of the most significant financial revolutions in history. The mysterious identity of Satoshi Nakamoto perfectly encapsulates the premise behind cryptocurrency: It is meant to be greater than any individual, party, government, or coalition.

The Dawn of the Second World

Developing countries (previously alluded to condescendingly as third-world countries) have historically had trouble with financial stability. Whether due to government mismanagement or the lack of viable economic opportunities, developing countries have been the victim of the vast majority of currency failures. Even in 2020, the countries that defaulted on sovereign debt were all developing.

Venezuela: A Perfect Example?

While fears of hyperinflation are only on the fringes in the US, there is no country in recent times that better encapsulates how crypto could be beneficial than Venezuela.

Eradicating Borders

Venezuela is not the only country whose population has been using crypto to fight inflation. Argentina is another example, with even the Argentinian president citing crypto as a means to combat inflation and calling it a ‘hard currency’ in the process. However, fighting inflation is not the only reason people in developing countries

Cryptocurrency: A Powerful Tool in the World of Finance

The idea of a currency that can be easily transferred and is used by everyone in the world is not new. In fact, PayPal’s initial aim was to create ‘the new world currency,’ according to the company’s first COO David Sacks. This is also discussed in Peter Thiel’s (one of the founders of PayPal) book ‘Zero to One’, where Thiel mentioned the lack of a technological breakthrough as one of the key reasons the company had to pivot to becoming a payment provider.

A New Store of Value

One of the fundamental tenets behind the rise of cryptocurrency has been the distrust placed in central banks and their money printing policies. At one point in 2020, around 20% of all the US Dollars in existence had been printed that year. And while initial fears of inflation seemed to be unfounded, we are now beginning to see high inflation, with more and more analysts predicting that inflation is here to stay.

A New Way of Personal Finance

Cryptocurrency not only offers new ways of using money, but it also supplements personal finance by making it way more versatile than it ever has been.

Security, Anonymity, and Transparency

It may sound strange that cryptocurrency can be both anonymous and transparent at the same time. However, it is possible thanks to the blockchain technology used to power cryptocurrencies.

DeFi and the Global Economy

Decentralized Finance, which is finance based on decentralized assets such as cryptocurrency, has picked up steam in recent years. A total of around $275 million of crypto collateral was locked in the DeFi economy in early 2019. By February 2020, the number had increased to $1 billion, and it eventually hit $14 billion in February 2021. The number now? Well, it’s a staggering $170 billion according to data from Chainalysis. That’s a 12x increase in less than 9 months.

Envisioning the World Ahead

As cryptocurrency continues to gain a foothold in the developing world, we should see many problems traditionally associated with the financial systems fade away. While I expect to see local start-ups capitalize on the crypto boom in these countries, the best thing is that cryptocurrency sees no borders. As long as local governments do not ban the major exchanges, anybody with an internet connection could make use of mainstream platforms such as Binance and Coinbase.



Medium publication for DeFi, web3, and cryptocurrencies. New authors welcome.

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Max Yampolsky

Building web3 and DeFi products. Writing about crypto and tokenomics. Founder of One Click Crypto - web3 robo-advisory app