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The prime use case of cryptocurrency was as a replacement for traditional fiat currency. On the Bitcoin genesis block was printed a message about how the banks were being bailed out after the market crash, a clear indication of the intention of this new technology. A similar message was repeated in 2020, though fewer people are aware of this later reference to money printing.
Although the use-cases have broadened considerably, this still remains a pivotal aim of cryptocurrencies and NFTs. It offers wealth generation mechanisms that are unparalleled in the classical investment industry and has provided a means for all classes of investors to create long-lasting wealth. It also provides opportunities for micro-finance, to bank the unbanked, and to help out those in emerging markets to gain a financial foothold.
All of this is happening outside of the controlled, centralized, legacy banking sector, which often hindered the many from acquiring wealth and enabled the few to hold onto it.
The issues of centralized banking
The problems contained within the traditional banking model are far too many to list in a single article. But it’s obvious that it promotes the centralization of wealth and enables a few key individuals to hold not just financial power, but also significant political power. All of this centralization of power can culminate in a devastating resolution such as war. The banking system and political governance system are inexorably intertwined.
On a similarly worrying note, banks are the ones responsible for determining whether or not you get a mortgage, and at what price. Even so, they are known to switch customers to higher rates to earn more profit while misleading their customers. They determine loans of all kinds. Accounts can be frozen for activities that go against their terms and conditions. Redlining is a policy where lenders identify minority groups that are more likely to default on loans and mortgages. Those of particular ethnic backgrounds are given worse rates, almost a form of institutional racism.
Fiat interest rates are now effectively negative when all fees are accounted for. If you pay $10 a month to store your money and earn $0.50 in interest, then you are still paying for the privilege of owning an account (though it may not be marketed as a negative interest rate). At one time, those who put money in a fiat bank account were rewarded, as is the case in all organic systems of economic investment such as cryptocurrency.
It’s difficult to set up an account, and there are reams of red tape associated with all kinds of financial activity, intimately tied in with the legacy banking sector. The charges and fees are extremely high …….