Exposure to traditional financial markets has recently become less attractive to consumers and institutional investors. There are many new opportunities and a lot of attention is being paid to decentralized funding. However, this new movement is not without its risks and flaws either.
For decades, consumers and institutional investors have studied the many different options available to them in the financial world. This approach has worked quite well as you could even generate passive income in your savings account. Today it looks very different as many banks charge negative interest rates and continue to exploit their customers.
Another problem that has made centralized funding less attractive is the persistent barriers in the industry. In particular, banks are forced to settle lawsuits on a regular basis, mainly due to their misconduct. This ranges from opening accounts for customers without their knowledge to masking products under different names with the same service to money laundering, etc.
Despite all of this, many people remain loyal to their banks or other financial institutions. Or that was the case in the past, since decentralized financing has many interested parties today. Unlike traditional financing, DeFi has no exorbitant fees, unfair terms, or financial exclusions. Instead, it is a movement that aims to provide financial services to everyone, regardless of their current access to these products.
Make DeFi more accessible
While it looks like decentralized funding is destined to disrupt traditional funding, much remains to be done. In the current version, DeFi is primarily aimed at users who have sufficient knowledge of the cryptocurrency market. Unfortunately, the crypto industry still remains a niche market today, despite the fact that Bitcoin (BTC) and Ether (ETH) prices have risen rapidly in recent months.
In fact, there are no workable guides on how to prepare for these new financial opportunities. Every existing manual assumes that the reader already knows the pros and cons of cryptocurrency, which is usually not the case.
Education is the first big step
Wading through the complexity of DeFi requires clear and precise training. There is an increasing need for educational platforms that cater to the beginner’s level of investment. Publications that contribute educational content related to DeFi saw significant growth over the course of 2020 and early 2021. Education initiatives aim to lower the barriers to entry to decentralized finance by educating people about cryptocurrency and the opportunities that the broader industry offers. Ultimately, a good goal for DeFi would be for 100 million people to have deposited at least $ 1 each of decentralized funding by 2025. It seems like an easy goal, but convincing millions of people to join this industry isn’t easy. Many people are not convinced of cryptocurrencies in general, and they are likely to think the same about DeFi.
We as an industry have to recognize that things have to get better in order to be taken seriously by the masses. Achieving a global impact with complex structures and technologies and requiring the use of cryptocurrencies requires clear and precise training.
A key catalyst for launching more educational initiatives is the recent saga from r / Wallstreetbets and GameStop. People all over the world suddenly found themselves in a position of power to make the financial market dance to their liking. It shows the need to make financial markets accessible to all, but today’s financial industry does not always allow it. This became apparent when multiple vendors stopped trading GameStop stock to protect larger investors. It’s a great example of how unfair the financial industry can be.
Create a level playing field
At its core, the financial sector can operate without gatekeepers or centralized intermediaries. The DeFi industry has shown that it can be done, even though the industry is still at an early stage. It is possible to create an environment where everyone can safely borrow, lend and trade directly, but the educational aspect must come first.
With public perceptions of traditional finances beating in the chin, it is a matter of time before large groups explore other horizons. Investing in cryptocurrencies has given many a taste of what financial freedom can mean. However, it is important to understand that this is only the first step in a long journey towards achieving this freedom.
DeFi offers much more than just Bitcoin, Ether or other crypto assets. While this gives access to decentralized funding, the industry leader-led education initiatives will help explain how you can use these assets for more than speculative purposes. A new era of finance may be upon us through education, research and advice.
This article does not contain any investment recommendations or recommendations. Every step of investing and trading involves risk and readers should do their own research in making their decision.
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Piers Ridyard is the CEO of Radix, the decentralized financial protocol. AY Combinator Alumni, Piers joined Radix after leaving his previous company that set up DLT-based deal rooms for handling syndicated insurance contracts.