“Unbanking” The Planet: Examining The Blockchain’s True Calling
As Q1 2021 rolls towards its inevitable close, all eyes are on Bitcoin and its crypto brethren. Will the market hold onto its remarkable gains for the first quarter of 2021? Will the market crash in Q2, shedding exponential percentage points in an ever-dipping barrage of red candlesticks? Is all this speculation just fueled by hype, or can the crypto market gain enough traction to come to rival the established institutional stock and commodity markets?
These are the questions that define the cryptocurrency community in 2021, and these are the questions that mainstream media outlets, venture-capitalist billionaires and institutional investors want answered. But, answering these questions is nearsighted, and the future of cryptocurrencies, decentralized finance (DeFi), and the crypto-revolution will have little to do with the profits produced during Q1 2021. Right now, the cryptoverse has developed some seriously speculative “gain-fever”, and the potential of swelling marketcaps has stolen the show away from the fundamental purpose of blockchain technology.
The truth is, cryptocurrency technology was never meant to post quarterly gains. The idea of getting rich by speculating on the market value of utility tokens or decentralized currencies is just a side effect of the real purpose of cryptocurrency technology. Crypto was invented to fix money, not to make money. I won’t bore you with the “ideologies” that fueled the early crypto-boom, you’ll just have to trust me when I say that blockchain technology was invented to bring financial security to an entire planet through radical change. How, you ask? By eliminating centralized banks and poisonous government policies, not by giving retail and institutional investors yet another market to be manipulated for their benefit, only to have the value liquidated back into broken fiat currencies.
So, if you really want to know if Q1 2021 means anything, you must forget about the moon, your next lambo, or what Elon Musk thinks about anything, and examine the idea that spawned Bitcoin in the first place: Unbanking the planet.
Banking the Unbanked – The First Step
According to a 2019 report from the US Federal Reserve, some 22% of American adults are either “Unbanked” or “Underbanked”. These terms define a subsection of the population that either relies solely on cash transactions, or supplements their lack of financial inclusion via payday loan services, pawnshop loans, paycheck advances, tax refund advances, or auto title loans.
Zooming out to the global picture, a whopping 1.7 billion adults were unbanked as of 2017, according to the World Bank’s Global Findex report. This means that almost a ¼ of the world’s population lacks the means to access the credit services, savings security, digital value transfer services, or other financial tools needed to effectively bootstrap themselves out of the vicious cycle of poverty.
As we can see in the above chart from the “FDIC’s National Survey of the Unbanked and Underbanked” the primary reason individuals are unbanked is a simple lack of capital. Not having enough money makes you unbankable in the eyes of profit-focused bankers. Interestingly, low income is followed closely behind by a slough of reasons including mistrust of banking institutions, privacy concerns, high or unpredictable account fees, and ID problems. It would seem that while not having enough money to open a bank account is a direct result of banks gatekeeping the impoverished out of the financial system, many of the unbanked choose to remain unbanked because of a much more fundamental reason; mistrust of banks and their unfair practices.
This is where crypto and decentralized finance come in. You may have heard the word “trustless” thrown around while you were scanning subreddits and “top gainer” lists in your most recent quest for the next shitcoin to bet your stimulus check on, but the cryptoverse has largely lost sight of this term, and how revolutionary it truly is. “Trustless” means what it sounds like it means, ie. you don’t need to trust one single entity with your value transactions, the whereabouts of your money, your access to your money, or how it is used while stored in the bank. Instead, blockchains and cryptographic algorithms provide a network that allows trust to be distributed amongst all members of a network, such as the miners, stakeholders, consumers, and developers. Simply, crypto-adoption will make you your own bank.
This trustless ecosystem is far better than the centralized monetary ecosystem we use today, as the “rules” that govern it are not designed to benefit a single, centralized party (like a government or bank), but rather designed to maintain consensus and trust in the network and to give everyone the freedom to bank on their own terms. This idea boils down to an alternative way to bank, one that utilizes simple communication technologies like the internet, LAN, or even SMS to allow individuals to use and store value on a decentralized ledger, in a cold storage wallet, without the need to be vetted by a “gatekeeper” institution or government.
The unbanked populations of the planet will be ground zero for the application of decentralized currencies and DeFi banking services. With any luck, by Q4 2021, the swelling market caps of the top cryptocurrencies will fund the first real applications of these technologies, as proof-of-concept becomes the only way for projects to maintain their value when the speculative fervor subsides.
We can see how trustless technologies solve many of the stated problems facing the world’s unbanked populations, and while one could delve deep into the nuances of the many iterations of the technologies that are popping up as the blockchain / DeFi space explodes with innovation, it is easy to see that the potential to bring financial inclusion to the unbanked is achievable through the development of DeFi services. But why stop at bringing the unbanked into the DeFi ecosystem? Why not do away with banks entirely?
Unbanking the Banked – The Revolution
The “moonbois” and John Mcafees of the world are not really the spokespeople we need to spur the true crypto revolution. The aforementioned individuals could care less if banks treat us fairly, or if governments are fiscally responsible, or if transactional data for taxpayer money is transparent on a public ledger. The Cryptonauts of Q1 2021 only care about one thing; gains. But, generating wealth for a downtrodden generation isn’t the crypto-revolution we need, it’s just some mutated crypto-mantra fueled by greed. The real crypto revolution entails getting people off of fiat currencies, forever.
In order to achieve this, cryptocurrencies and DeFi technologies need to offer a stable, reliable form of value, something that cannot be achieved so long as Bitcoin and Alts are traded like pogs at a 1990’s 6th birthday party. So long as “marketcap vs circulating supply” is the defining factor for the success of a cryptocurrency, and not transaction fees, network performance, or scalability, we will never see adoption truly take off, and thus, we will never see the unbanked or the banked enabled to switch from fiat to crypto.
Decentralized Finance – How Do We Get From Here to There?
If the point of decentralized blockchain technology is trustless finance and not speculative markets, how do we convince governments, bankers, and consumers to make the switch? The answer is simple but surprising – we don’t, they are convincing themselves. Right now, money is flowing into Bitcoin and alts from every direction as institutions and individuals gamble on the speculative value of these technologies, causing immense volatility – but behind the scenes, fundamentals are solidifying.
In a January 2021 interview with Forbes, Marshall Hayner, the CEO and founder of digital asset payment solution Metal Pay, said he thinks BTC has entered a fourth stage of adoption:
Bitcoin has reached all-time highs over the past few months, and with this meteoric rise, institutions, hedge funds, and major corporations have begun to add digital assets to their balance sheet. As the oldest, most liquid, and most well-known cryptocurrency, bitcoin is rapidly becoming a hedge against rampant inflation of fiat currency (USD, EUR) – This is what I’m calling ‘the fourth wave’ of cryptocurrency adoption. The first three waves were exuberance, speculation, utility and finally acceptance.
– Marshall Hayner, CEO of Metal Pay
While I feel it is too early to say we have transcended the “utility” phase of adoption, I agree with Hayner – we are certainly seeing acceptance, and that is a big deal.
As big players like PayPal, Elon Musk, Mark Cuban, MicroStrategy, JP Morgan, and a plethora of others begin to store value in Bitcoin, the utility of the token is becoming apparent. Bitcoin is a great tool to store value. It might never become the “electronic currency” it was meant to be, but the fundamental principles beneath it make Bitcoin the perfect financial tool for storing value. When the dust settles, speculators will be rewarded with their very own piece of one of the greatest stores of value ever discovered, whether or not this utility justifies today’s explosive BTC valuations is yet to be seen.
With Bitcoin enticing an influx of capital into the greater crypto-market, emerging DeFi technologies, represented by their own digital tokens, are finding the traction they need to develop their platforms and showcase the potential of blockchain tech. At some point, the bubble and hype will subside, leaving behind an established DeFi ecosystem, and a wasteland of bad ideas, Ponzi schemes, and broken dreams. Q1 might be the height of speculative mania, but somewhere beneath it all, there is a shortlist of viable projects that are building the underpinnings of a financial revolution unlike the world has ever seen.