What's Hot

    a very unprofitable cryptocurrency

    June 30, 2022

    Elrond (EGLD) creates an NFT platform for Romania

    June 30, 2022

    Warren Buffet: His bank Nubank becomes conducive to cryptocurrency trading

    June 30, 2022
    Facebook Twitter Instagram
    Facebook Twitter Instagram
    THECRYPTNEWS
    • Home
    • News
    • Guides
    • NFT
    • Analysis
    THECRYPTNEWS
    Home » How DeFi Can Help Narrow Wealth Gap
    News

    How DeFi Can Help Narrow Wealth Gap

    AdminBy AdminJanuary 13, 2022No Comments6 Mins Read
    Share
    Facebook Twitter LinkedIn Pinterest Email


    Source: Adobe / Hyejin Kang

    Hisham Khan, CEO of Aldrin, at Solana-powered crypto exchange.
    _____

    In 2021, we saw crypto become more accessible to those who truly need it. In 2022, we could finally see the wealth gap start to narrow.

    While a significant portion fueling the adoption of crypto has been hype and speculation, crypto, blockchain, and decentralized finance (DeFi), key developments in the technology have undoubtedly helped people in need.

    NFTs (Non-fungible tokens) are helping artists in developing countries access new avenues of income, while play-to-earn games such as Axie Infinity are helping small-income earners in the Philippines generate wealth.

    Digital assets have also grown in accessibility, from the rise in crypto ATMs to the uptick in digital wallet creation from developing nations, as well as data that shows lower-middle-income countries are investing and holding crypto at much higher rates, with adoption surging over 880% this year in more than 154 countries.

    On a national and political level, countries, cities, and traditional financial institutions are also embracing crypto to increase wealth generation, from El Salvador establishing its own Bitcoin CIty to Miami generating USD 7m in yields with an intention to reduce taxation for citizens through its own token.

    These are all part of the silver lining of the impending dark clouds, as the world of finance is set for a rocky start transitioning into 2022.

    Evolution of finance from 2021 to 2022

    Across the world, communities are feeling the effects of inflation. The US inflation rate has accelerated, raising fears the Federal Reserve has “lost control”. Inflation in ASEAN (the Association of Southeast Asian Nations) is also increasing.

    With the USD being the global reserve currency, the wealth gap also continues to grow, with 89% of US stocks reportedly being owned by the wealthiest 10% of Americans, and traditional investments like bonds bringing smaller and smaller returns.

    The rise in inflation and debt across the world, coupled with the issues with developing countries accessing capital, and wealth continuing to erode away from fiat inflation has driven more people to seek ways to preserve and grow the value of their assets.

    While hype and speculation have fueled mainstream adoption and attention on crypto, blockchain, and DeFi, the discovery of anti-inflationary possibilities are helping the less-wealthy improve their financial literacy and provide greater financial inclusion.

    However, there is still tremendous untapped potential as newcomers to wealth generation are not fully equipped with the knowledge of how yield-bearing assets work, but this is steadily changing with education and time.

    The power of DeFi for passive income and wealth generation

    As the ultra-wealthy reap the benefits of passive income streams and can avoid as much as USD 163bn of taxes yearly, crypto has finally provided an opportunity for those who are forced to work 50-60 hour weeks in endless cycles of financial bondage to have an opportunity to break free.

    For the first time, anyone can access passive income.

    The barriers to earning passive yield have become democratized and accessible to anyone with the internet, and wealth generation via passive income is finally not withheld to the already wealthy.

    We now know that traditional investment strategies, including bonds, trust funds, stocks, mutual funds, exchange-traded funds, and annuities, which typically range from 1-4%, are now declining together with the state of the economy.

    In comparison, DeFi staking and yield farming offer much greater wealth generation opportunities, with relatively safe yield farming methods on stablecoins generating anywhere from 6-20% through methods such as earning interest through lending, and liquidity mining through stablecoin pools.

    Single-sided staking, which is one of the yield farming methods, has also become a key way to build mutually beneficial platform-investor relationships.

    By allowing token holders to gain yield together with the growth of the platform / protocol, similar to how stock / stakeholders gain dividends from the company in traditional finance, but with comparatively higher returns, investors can earn anywhere from 15% to as much as 45 % a year.

    The staking also benefits the platform by reducing the number of tokens in circulating supply, reducing inflation and dilution of the assets, and also increasing the total value locked, providing more stability and capital for investments and other business activities for the platform to work with.

    Of course, the yield farming methods are not without their own risks, including price volatility, vulnerability to hacks, and exploits of smart contracts just to name a few.

    Investors will still need to do their own research on platforms before deciding to do yield farming on those, and factors such as tokenomics, security, future growth potential, lock-in period, rate of return, and additional benefits such as governance ownership will all have to be considered.

    The path towards greater financial inclusion

    As there are still issues to be fine-tuned in making passive income available for anyone, adequate education is necessary to help users understand, safely and easily access the fast-moving, nascent, and constantly evolving ecosystem of crypto, blockchain, and DeFi.

    Regulation also needs to catch up to ensure investors can have their assets better protected from online scams and hacks.

    Currently, in TradFi (traditional finance), institutions such as banks, portfolio, and fund managers often have minimum financial requirements, restricting access to the same investment opportunities that the wealthy can enjoy.

    In comparison, smart contracts in DeFi execute and process transactions on the blockchain for DeFi and crypto, treating everyone fairly without bias or minimum capital requirements.

    Hence, if both regulation and education are done well, DeFi can serve to level the playing field for less affluent retail investors and the wealthy.

    Regardless of whether they have a few dollars or a few thousand to invest, there is no preferential treatment in this area, allowing retail investors to overcome financial barriers existing in TradFi.

    DeFi also offers more individual control over investment decisions compared to traditional finance, without requiring custodians and intermediaries like banks, portfolio, and fund managers, which also take a significant percentage of profits.

    We could very well see a future where traditional financial institutions actively integrate DeFi staking and yield farming opportunities to increase returns to remain competitive and attract investors.

    TradFi institutions are merely delaying the inevitable and could result in DeFi catching up in mainstream usage for investment and wealth generation opportunities.

    Despite the gloom and doom caused by the pandemic, resultant inflation, and other financial woes there is tremendous potential for the world to come out better, and the wealth gap to be narrowed.

    One thing is for sure, as the crypto, DeFi, and blockchain ecosystems continue to evolve and intermingle with the world of TradFi, retail investors will benefit from improved and greater access to investment opportunities and financial inclusion.
    _____
    Learn more:
    – DeFi Trends in 2022: Growing Interest, Regulation & New Roles for DAOs, DEXes, NFTs, and Gaming
    – How Bitcoin & Crypto Might Help Ease Wealth Inequality (Without Miracles)

    – Total Value Locked in DeFi is a ‘Deceptively Complicated Metric’
    – Bitcoin and Ethereum Can Coexist With DeFi Bridging the Two

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
    Admin
    • Website

    Related Posts

    Work on a Multi-CBDC Platform Has Revealed ‘More Questions Than Answers’ – BIS

    March 22, 2022

    Japan’s Crypto Exchanges Set to Speed ​​Up and Simplify Crypto Listing Process

    March 22, 2022

    Crypto Donations To ‘Freedom Convoy’ Evade Government Seizure

    March 22, 2022

    DeFiance Founder’s USD 1.76M Loss is a Lesson For NFT Investors

    March 22, 2022
    Add A Comment

    Leave A Reply Cancel Reply

    Recent Posts

    • a very unprofitable cryptocurrency
    • Elrond (EGLD) creates an NFT platform for Romania
    • Warren Buffet: His bank Nubank becomes conducive to cryptocurrency trading
    • Vitalik Buterin explains why and how he created Ethereum (ETH)
    • Florida: Orlando wants to become the center of the metaverse

    Recent Comments

    No comments to show.

    Subscribe to Updates

    Get the latest sports news from THECRYPTNEWS.

    Advertisement

    Archives

    • June 2022
    • May 2022
    • April 2022
    • March 2022
    • February 2022
    • January 2022
    • December 2021

    Categories

    • Analysis
    • Guides
    • News
    • NFT

    The leader in news and information on cryptocurrency, digital assets and the future of money, THECRYPTNEWS is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies.
    We're social. Connect with us:

    Facebook Twitter Instagram Pinterest YouTube WhatsApp Reddit
    Top Insights

    a very unprofitable cryptocurrency

    June 30, 2022

    Elrond (EGLD) creates an NFT platform for Romania

    June 30, 2022

    Warren Buffet: His bank Nubank becomes conducive to cryptocurrency trading

    June 30, 2022
    Get Informed

    Subscribe to Updates

    Get the latest creative news from THECRYPTNEWS

    Facebook Twitter Instagram Pinterest
    • Home
    Copyright © 2021 Thecryptnews.com

    Type above and press Enter to search. Press Esc to cancel.

    We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
    Cookie SettingsAccept All
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
    CookieDurationDescription
    cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
    cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
    cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
    cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
    cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
    viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
    Functional
    Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
    Performance
    Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
    Analytics
    Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
    Advertisement
    Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
    Others
    Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
    SAVE & ACCEPT

    DMCA - Terms and Conditions - Privacy Policy