As the world continues to pray for the heart-breaking conditions in Afghanistan, reports state that many Afghanis have already lost access to their wealth and bank accounts. Thousands of people waiting in line to withdraw their life savings but the banks ran out of cash. Imagine saving for decades only for your life to be turned upside down in a week or two. This yet again, serves as a reminder why we need options to access wealth outside of legacy systems.
Blockchain, is first of the many revolutionary technologies to decentralize wealth in the near future.
What is Blockchain?
Blockchain is a decentralized database that acts as a digital ledger that keeps a record of all transactions carried out on the system. These transactions are then duplicated to be reflected across all computer systems active on the blockchain. Every time a new exchange is carried out, the blockchain stores the data on that participant's block and is reflected across all digital ledgers on that network. All transaction data present on the systems of the blockchain can be accessed and managed by multiple participants from any part of the world. This is known as Distributed Ledger Technology (DLT).
Why is DLT a revolutionary technology?
Let’s take Afghanistan’s situation as an example. In the current scenario, millions of Afghanis have lost the entirety of their life savings and wealth tied up in banks. Now let’s assume they invested a fair share of their savings or income in Bitcoin. This wealth would be redeemable anywhere in the world. Not only that, but they would also be able to exercise complete control over it. It would serve as a safety hatch even in a case as extreme as collapse of the government or legacy wealth systems, since Bitcoin is valued globally.
But doesn’t all this sound too good to be true? As solid as this plan could be, it has numerous challenges of its own.
Challenges
What is the first word that comes to your mind when you hear ‘Cryptocurrency’? That’s right, volatile. Crypto has become a buzzword in today’s world whose valuations can shoot up to the moon or hit an all-time low in the blink of any eye just by mere Twitter banter. Many argue that crypto valuations have kept the market in a constant bubble and an average person with an average salary will not feel safe to invest in it especially for the sole purpose that there might be an apocalypse someday.
It is also important to understand that decentralized systems of wealth cannot exist on their own, i.e., it is only logical to integrate them with existing legacy systems instead of replacing them completely. After all, crypto is valued in legal forms of currency such as INR, US dollars, etc. for it to hold any value in the first place.
Legal challenges of crypto expose people to the scope of tax evasions, money laundering and illegal transactions owing to the anonymity of transacting parties and lack of digital or paper trails.
Conclusion
Balance is key. Organizations should strike a reasonable balance between centralized and decentralized institutions of wealth. As an individual, it is important to analyze the risk involved before investing in crypto and planning your portfolio accordingly.
Remember, that we are not just investing in cryptocurrency but essentially investing in Distributed Ledger Technology (DLT) or Blockchain, which has infinite scope to change the world and should be valued accordingly.
We have elected to put our money and faith in a mathematical framework that is free of politics and human error - Tyler Winklevoss, Winklevoss Capital Management
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