It won’t be wrong if I say the honeymoon period between blockchain and fintech has divulged a new morphism of financial technology that the world has never seen before. Yes, it is very true that the new financial technology has been on the horizon for a few years now, but we must not forget that there is always uncertainty associated with new technologies. They can either completely revamp the existing systems or make no effect at all. In this article, we’ll probe into the blockchain and know what the hype all about is.
It would be too early to say if the blockchain has set off to the revamping of the financial sector or not but it has reinvigorated the system for sure. How has blockchain done it? The prevailing system, FIAT currency, is an epitome of a centralized system while the modus operandi behind the blockchain is a distributed database that is highly immutable, contains open-source protocols, and accessible by all users.
The blockchain has tried to provide the fountain of youth to the industrial-era finances and the third-parties residing between the business and the customer are pulverized. As a blockchain development company in the USA, We have noticed the biggest proposed change of blockchain in the financial sector is the vanishing of the private ledgers of the third-companies, hence the accretion of money in complex financial use cases is also increased.
But, the antidote was not antidoted, rather proved to be venom. Why? Did everything seem so impeccable about it? How even this idea can fail?
The sole problem with this idea is that everything was so impeccable like smooth transactions without trusted third parties, but it didn’t work out, at least for now. The recent brutal failure of some Defi (decentralized financial) applications likes has given it a serious setback to the smooth emergence of this technology, who knows it may even act as the final nail in the coffin? It is loaded with a lot of errs, and these err have lowered its feasibility considerably.
It has a major philosophical err and multifarious technological mistakes like high vulnerability to hackers, human errors in codes, non-changeable smart contracts, no credible investor. Etherum, a leading Defi company had been under the storm due to a box protocol blunder, a blunder in the algorithm allowed the hackers to steal the money. It showed that the accomplishment of the dream of transparent financial transactions is not so transparent.
The philosophical err is to be too utopian about transparent transactions. The peer-to-peer transactions cannot go as smoothly as mustered by the innovators behind Defi. It will only promote anarchy of the system and leave the financial system an orphan. Some kind of veteran financial third-party would be needed to demarcate the boundaries between the dos and don’ts of the peer-to-peer transactions so that the original idea of getting transparent transactions can be achieved.
The recent utterings in the virtual conference of Unitize Blockchain have been recently denied by Apple Inc. As Coinbase, a cryptocurrency based mobile application is facing tremors in getting access to the apple store. Apple has exactly pinpointed the reasons why it cannot support the app, unfortunately, these reasons happen to be the core on which the edifice of the Defi resides i.e. 1) The ability to earn money using cryptocurrency 2) The ability to access device applications.
The tech innovators usually commit a fallacy when they try to discern it between the horse of the long race or just another fad. The truth is, it is not in the hands of the tech experts to decide the fate of blockchain and defi apps. Defi applications are challenging the entire hierarchy of financial institutes. It is not simply a fintech innovation rather apolitical in the sense it has the potential to destabilize the economies of many countries. That is the only reason, it has not gained the momentum it deserves to have. The immigration of cryptocurrency innovators from America to Europe and Asia is another fact that further strengthens the argument established by me. It has the potential to implement the digital currency sponsored by China just the way the Chinese Tang dynasty did in the 7th century. And guess what? Capitalist America does not want it. Apple’s decision not to lend her Apple store for the cryptocurrency-based apps further validates the reluctance of worldwide banks to shift to Defi applications.