How Defi and Web 3 0 Shape the Future of Finance – S Robi

How Defi and Web 3 0 Shape the Future of Finance – S Robi

Mavericks, ideologues and inventors have introduced many wonderful ideas into the financial market over the centuries. These ideas deny the prosperity of the human race, as well as its decline and the associated non-financial morality. Yet, the common denominator over the centuries has been that power in the financial markets has become more concentrated.

During the global financial crisis, not too long ago, we saw the conventional financial system fail. These systems are not only failing on their own, but also depriving consumers and losing their confidence, forcing regulators to wake up to the reality of a broken system. To protect existing consumers and maintain financial stability, governments had to rescue the companies that caused the crisis in the first half.

It has started a series of serious new ideas in redefining our financial structures and systems. The idea of ​​decentralized money then began to move forward with vengeance. When we invest in a currently regulated traditional financial system, we are bound and subject to the operational control of intermediaries (especially banks). Have these traditional measures been addressed to promote inclusive financing or consumer interests? No, there will be a devaluation.

* Old money, not included

Despite all the long claims, we have failed our world brothers. More than 1.75 billion people are still bank-free. In an interconnected world, they cannot access fair-value credit or invest in their satchel-sized weekly or fortnightly savings. Importantly, despite the growth of the Internet, many of them face digital-exclusion and, therefore, are not in the mainstream of socio-economic participation.

Many of these consumers, sadly, are forced to resort to informal or over-the-counter payday loans to overcome their cash flow problems. Even if these customers are banking, conventional banks may not be interested in dealing with such small ticket sized customers; Or consumers may not have enough revenue from such an insignificant category.

Moreover, existing financial systems are set up in an ecosystem where interconnection is weak or costly. Switching costs restrict financial freedom for consumers to choose the right products and services. For most parts of the world, the simple task of transferring money from one financial institution to another seems complicated and time consuming. It may take a few days for a wire transfer to take place in the market of different countries.

Have we ever thought or questioned our financial institution? Why does it take two to three days for stock market transactions to close when most stock markets are digital? Why are credit card access fees still expensive for sellers or merchants? Why are banks still struggling and unwilling to serve small entrepreneurs and businesses? Why is it difficult to understand the existing operational silo in this entity? Why are regulators still concerned about allowing Fintech’s growth to accelerate? Why does it seem that regulators are supporting conventional institutions, even though they cannot demonstrate capacity and financial influence in society? Such questions abound and ultimately point a critical finger at what else can be done to improve the quality of what funding actually provides.

* Web 3.0 and why

Web 3.0 is still evolving, as are decentralized financing (DeFi) innovations such as blockchain and distributed lasers. Web 3 is based on the basic idea of ​​decentralizing the overall nature of the current Internet and empowering all content creators.

Cryptocurrencies – unpopular with many governments – are a commercial application of various Web 3 concepts. Extensive use of blockchain technology is only gradually scaling. There was very little room for Web1 user interaction. It was basically readable and with slow access. Web 2, which is currently in use, has given birth to social media where users create content.

* DeFi (decentralized money) is not contempt

The basic premise of DeFi is to use peer-to-peer interaction and to avoid the presence of bricks and mortar or the cost of access. This fundamental commitment will affect and change the business model of the financial institution. Decentralized finance includes financial applications built on blockchain technology, typically using smart contracts. Smart agreements are automatically enforceable agreements that do not require existing intermediaries to execute agreed transactions. It will only require internet connection.

Most current defy applications are built using the Etherium network. With innovation in this space, there are emerging networks that can provide better access speeds, lower cost scalability and improved security. DeFi innovators are also beginning to address concerns about the use of high energy and are becoming more green-friendly.

The existing financial system has intermediaries and related inefficiencies. These come at the expense and expense of consumers. However, DeFi solves these with its shared infrastructure and interfaces, which in turn allows for efficient interoperability. The universal nature of DeFi provides security and confidence, which current institutions have failed over the years.

* Concerns will continue

Governments and regulators will continue their social-governance concerns, as well as fears of ‘losing control’. This will include the following questions:

• Will any of Web3 reduce government control over financial institutions?

Will decentralization make it harder for governments to control the Internet?

Which of these technologies would pose a national security challenge or cause a systemic problem?

Will they further complicate consumer protection issues and cyber risk issues?

• Can any technology be used as a weapon against the state?

The traditional industry lobbying of traditional old boys with centralized financing will continue. It could use its network to provoke the potential short-term illness of technology-enabled decentralization.

Yet realist governments and active regulators will not take the bait, although it may seem counterintuitive. Rather they can use their mantle to create a strong and resilient financing process for all. They are looking at the possibility of creating a financial democracy with better prospects for financial inclusion. We have also seen the rapidly evolving world economy as fintech companies are increasingly embracing cashless and virtual payment technology. In India, the government itself is the biggest advocate of being cashless and digital.

According to various estimates, Web 3.0 could contribute about $ 1 trillion to Indian GDP by 2031. With 845 million Internet and 518 million social media users in 2021, India is the second largest Internet user in the world. By 2040, the total number of Internet users in India is expected to exceed 1.53 billion and yet the overall population will remain with an average age of 35 years and be productive. With an adequate regulatory approach and continued support for the innovative use of technology in finance, India can show the way to financial inclusion and influence.

The benefits of DeFi are to serve all stakeholders and all types of customers. Otherwise only the economically strong part will be able to carry or access it. The DeFi community needs to address the concern that it is trying to beat the system rather than improve it! Otherwise the regulator and the government will not leave the ground. Not a bit, not a byte!


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