I have been reading up on the different financial systems and how they came up and how they benefit humans.
Now with the rise of cryptocurrency, I am curious, why would we need to decentralise the financial system and why is bitcoin/ crypto so big?
Thank you in advance
Comments
Need is a strong word. It’s more a combination of what people think is best for individuals, and what they want for themselves. People who advocate decentralized banking or currencies believe world governments have a tendency over time to destroy their currencies through (hyper)inflation or restrictive monetary policies like confiscating gold in the US or locking protesting truckers out of the banking system in Canada. People do not like the idea of the government being able to exert that much control over their life savings. At the worst end, you get Zimbabwe who inflated their money so much you literally had to pay for daily groceries with literal stacks of trillion dollar bills. The money became completely worthless. A decentralized currency in theory can prevent this, because if your savings is in a currency outside the one controlled by your government, your government can’t hyper inflate away all your life savings.
To add something simple like a donation button to a website that takes creditcards, you have to use roughly 3 3rd party services+tax handling. Its shockingly difficult to do and the best way is to just find a place like patreon and bite the fees (like 12% I think, part patreon, part creditcard)
To add bitcoin donations to your website you paste a number on the page. (like 35paDUzy1Ate49V6h4exuJ18jcHppY7rmz) and anyone with can send bitcoin to it without having to involve any 3rd party other than the blockchain. No fees, no weird 3rd party integrations, no bank that can fail, its like someone handing you cash, but digital (and not controlled by governments).
bitcoin is big basically just because it was the first. Beware anyone telling you its the next big thing. wait until something becomes the actual current thing before depending on it.
Crypto is not a decentralized system as much as a decentralized entity.
The us dollar with the federal reserve would count as a system with rules and regulations and oversight etc.
Bitcoin does not follow any rules, and are not protected by an army or a group of people or protected under law to settle debts public or private. It lacks a system. And those telling you otherwise are doing it for their own gain.
If someone hacks your bank account in wells fargo, or if the bank goes under not to worry government will hand you up to 100k per account. Cause there is a system.
Bitcoin? Nothing. North korea just stole billions. And will continue to steal more from others. Your keys are not safe and will never be. Nothing will back you. It’s essentially virtual cash but way easier to steal and way more volatile.
Lastly bitcoin, according to experts and professionals, is more or less a way to funnel money from those who bought in first to those who hold to the peak value and then dump. Bitcoin intrinsically will hit 0 it’s just a matter of when. Those telling you otherwise are trying to get you to buy in so they can take your money. Much like a virtual ponzi scheme.
Crypto is big because it’s useful for clandestine trades that you don’t want banks to be able to trace for whatever reason (often but not always illegal stuff).
As for decentralizing? Nah. That’s just fearmongering or anti-government propaganda. There’s a lot of easier ways for governments to fuck you over if they really do want to. And if they do, you have bigger problems to worry about than centralized finance systems.
> why would we need to decentralise the financial system
to increase privacy
to prevent things such as bans on accounts for marijuana stores or sex workers
Need is a big word. Do we “need” to decentralize the financial system? No!
The financial system has a rather young history.
Prior to the renaissance, finance didn’t really exist. The reasons are simple, paper was way too expensive, and the political world way too unstable to allow a merchants and governments to establish the trust required.
It’s really when Europeans learned to make cheap paper and colonize the rest of the world that they began seeing currency and asset handling as an industry of its own.
What was rapidly realized is that without a strong oversight of the financial institutions, this industry goes through massive speculative bubbles, insider manipulation, and other terrible schemes, and because finances is close to money the downturn in finances leads to economic downturn as well which affects social and political stability.
As a citizen, I wish for my interests to be defended by the government. I wish for stability in my home, job, and community. I don’t wish for some crook in an ivory tower to be allowed to screw up the financial markets, and leave me eating shit because they could make a quick billion sitting on their ass and screwing everything up.
We need to be protected from the greed of criminals in a tuxedos, and this comes with oversight and laws that protects us as a society and as nations.
Note that it’s not possible for cryptocurrency to change the financial system unless the government decides to allow it.
The government could easily pass a law that using some / all cryptocurrency is a crime, and use the police to shut it down. Although the police couldn’t catch every single user, they’d get enough to wreck cryptocurrency as a practical alternative.
So, if it was a good idea to switch to decentralized finances, building cryptocurrency isn’t an important step. You could decentralize anyhow if the government decides to help.