Fans of DeFi (Decentralised Finance) are so ardent, they have a description for the “old world” of banking that most people use today… Traditional Finance (TradFi). Will DeFi eventually replace TradeFi? It certainly looks that way.
When I transfer dollars to you, we either have to do it in person – with me handing you cash – or through the banking system, which involves me telling my bank to send money to your bank account.
Blockchain technology gives us capabilities that simply were not possible before. The Bitcoin blockchain allows us to transfer bitcoin person to person (or “peer to peer”) without any intermediary. (Bitcoin with a capital “B” refers to the blockchain, whereas bitcoin with a lowercase “b” refers to the cryptocurrency.)
A simple way to explain how it works, is to think of the Bitcoin blockchain as a giant Excel spreadsheet that shows the complete transaction history and location of every bitcoin. Every 10 minutes, the spreadsheet gets updated as an additional “block” of new transactions is permanently added to the spreadsheet. Everyone can have their own copy of the spreadsheet. It’s completely transparent.
Rather than locking all the information away for a certain person or group to use, the data stored on a blockchain are done in plain view on computers all around the world. In the simplest terms, this is precisely what a decentralized blockchain is… data that anyone can see and verify at any time.
Bitcoin has been around since 2009 and it is only now that it is entering mainstream with Paypal, Ebay and other major organisations accepting Bitcoin. Just a few weeks ago, the Office of the Comptroller of the Currency – basically the U.S. Treasury – told U.S. banks it can use blockchains to store and transfer funds.
Banks, social media networks, and payment processors are about to give billions of their existing users simple ways to use crypto, too. In some cases, those users won’t even know they’re using crypto. A bank could, for example, convert dollars to a dollar-pegged crypto to process a payment instantly – instead of the traditional two to three days for an automated clearinghouse to do it.
Now DeFi (decentralised finance) mostly using Ethereum is just coming into its own. It will enable transactions such as I could write a program that says if any account has more than $10,000, I’ll lend the account $5,000 in, say, Ethereum (ETH) tokens, at an interest rate of 5%. In this scenario, consider if Account-X applies for a loan… The software could simply verify that the account has the appropriate balance, put a hold on $10,000 of those funds, and transfer the $5,000 in Ethereum instantly. No middleman or human would need to be involved.
If you are not already involved with Bitcoin and Blockchain technology then let me tell you that are missing out on a great opportunity to bless your family. I believe Blockchain will be important for Christians as persecution intensifies and existing sources of funds dry up Christians will be able to transfer funds with DeFi to other Christians either as a donation or loan with an agreed on interest rate and governments cannot interfere with the transaction at least at the moment.