DeFi: The Banks Are Cooked

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(Edited)

It may seem hard to see at the moment, but the banks are cooked. Most of them will not withstand the onslaught that is about to befall them.

This is a concept that is becoming clearer each day. Over the next 10 years, we will see the eradication of the existing banking system as we know it. In its place will become one that is built upon DeFi.


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DeFi is obviously the story of 2020 in cryptocurrency. Right now it is the Wild West with a great deal of insanity taking place. Yield Farming is the rage which as crossed over, in many instances, into the absurd.

That said, this is likely to be a passing trend. The Yield Farming craze will eventually die down. The same will not be said for DeFi.

Decentralized finance is going to be the basis for a new financial system. Simply put, it offers too many advantages over what we have now. This means that the incumbent institutions, those enormous entities that control trillions of dollars, will have to adapt or die. Unfortunately for them, their very existence is not really required.

To start, Facebook announcing the release of Libra is a major blow to the banking world. One of the biggest advantages to this is that it instantly allows anyone with an Internet connection and a Facebook account to start banking, in the equivalent of USD.

This one project could bring billions in, ones who are presently missing from the existing banking realm. Since most people use banks to send, receive, and store money, this will facilitate much of their needs. Here is where we see many of the traditional banks affected.

Naturally, the commercial banks are a different story. Do not be mistaken into believing they are on secure ground. Much of the banking industry was already affected by technological developments. In fact, few realize that in the United States, the majority of mortgages originate outside the banking industry. Companies like Quicken loans has basically taken over that sector.

Therefore, none of this is novel.


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Where DeFi is lacking, at the moment, is with infrastructure. This is what is preventing larger money to enter the market. As more is built out, we will likely see a lot of money enter the space.

For example, part of the basics of banking is the paying of interest on loans. This is a fundamental of the banking process. Banks earn money on loans they make, which comes from the deposits they receive. Of course, the interest paid to the depositors is a lot less than what they loan it out at. Here is where their profit comes in.

The challenge is that banks are paying near zero in interest. Most short-term interesting bearing mechanisms are netting well under 1%.

Here is where a company like Cresco Fin is stepping up. Based in Switzerland, it offers interest bearing accounts that are insured. The company uses blockchain for the contracting apparatus. Any funds placed on deposit will receive an interest rate of, I believe 3%.

An interesting aspect to this project is that there is no debt involved. Instead of generating loans, it simply goes out and buys receivables. These receivable are placed in a smart contract and executed when paid. Here we see the cashflow the entity needs to pay the depositors.

All of this is runs through Lloyds of London.

Presently the company accepts USD, EUR, and CHF. There are plans to accept more forms of deposit including stablecoins. Do not be surprised that, if the Libra takes off, a company like this begins to utilize it.

https://crescofin.ch/


Source

These are just a couple of examples that are disrupting a large segment of the banking system. As we know, there are already some fundamental pieces forming around other aspects of the financial arena.

Here is where we see the infancy of the industry starting to evolve. Wall Street type firms will not switch to a decentralized system until their are the mechanisms in place. For example, a lot is made about the Yield Curve in traditional finance. This is a major part of banking. Essentially, many players will be on the sidelines until a DeFi yield curve is generated.

Tokenization offers many different opportunities that are non-existent in the banking world. The ability to easily collateralize almost any asset means this practice becomes mainstream. Most anyone can participate.

Decentralized entities form the perfect basis. Ultimately, we will likely see sites that do this for us. Just like Quicken digitized the mortgage process, making it easy for anyone to apply, #DeFi buildout will allow for anyone to tokenize whatever they want.

This means that we will see a time where assets with little financial use suddenly become collateral. It can be used for down payments on loans or even funding for different projects to increase wealth and productivity.

At the end of the day, the banking system is nothing more than a 3rd party facilitator. It was established as a means to operate between two different parties. In fact, the same is true for much of Wall Street. These entities bring the people with money and merge then with people who want money. That ultimately what the much of the financial sector is built upon.

At the same time, Wall Street serves the roll of providing the counter-risk to many offerings. After all, someone has to step in on the other side to maintain equilibrium. Here is where trust comes in. Of course, as a company like AIG proved, this is fallible.

We will ultimately see the banking system replaced by code. It is true that sounds like crypto-geek utopia but that is exactly what is happening. Tokenization and smart contracts form the basis for codifying a large portion of our financial system.

As more of this happens, there is less of a need for banks to operate as intermediaries in the financial process. We already starting to see larger institutions step into the crypto world. This is just the beginning.

Within a decade, much of the financial system will be decentralized. There is simply no way for the present establishment to stop this.


If you found this article informative, please give an upvote and rehive.


If you found this article informative, please give an upvote and rehive.

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Your current Rank (18) in the battle Arena of Holybread has granted you an Upvote of 17%

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pixresteemer_incognito_angel_mini.png
Bang, I did it again... I just rehived your post!
Week 33 of my contest just started...you can now check the winners of the previous week!
8

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Good job, taskmaster.
Did my UP and rehive 😃

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LOL thanks.

You support, along with every one else, is always appreciated.

The bankers roamed free for far too long. Time to take then to the proverbial woodshed.

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Easily the banking system is going into nonentity. Through DeFi one can basically stake, earn rewards and store token something the banks might ask for a lot to do like asking for collateral and the time wasting that's involved with Centralised banking. The future is here

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It will likely take the better part of this decade to flush out but we are seeing some early signs this is the direction it is all heading.

Too many people did not benefit from the existing system. This means that we are going to have to erect a new one. It is completely different, in fact, the inverse of what we presently see. This is the subject of my article tomorrow.

More should benefit from a system build upon tokenization and other forms of asset creation as opposed to debt.

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Too many people did not benefit from the existing system. This means that we are going to have to erect a new one. It is completely different, in fact, the inverse of what we presently see. This is the subject of my article tomorrow.

I'll be hopeful to see that article tomorrow,the existing system is flawed, too slow and cost and of course possess no decentralisation. Inasmuch as I can say we need time, we're making headways.

Exciting article, my word!

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Sorry I gave you some fake news. I will have to push that one out another day. There is something else that is more exciting to write about tomorrow.

But I have a feeling you will be very happy about it.

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Well it's a world of information I could make do with it even if I wouldn't like it very much,

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Congratulations @taskmaster4450! You have completed the following achievement on the Hive blockchain and have been rewarded with new badge(s) :

You received more than 690000 upvotes. Your next target is to reach 700000 upvotes.

You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word STOP

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I'm interested to see how the DeFi situation will evolve once it goes past frenzy stage. At the moment, I'm testing out CeFi options and finding it pretty decent but like you say, it comes down to trust. If you don't trust the CeFi company then keep the keys to your crypto and wait for DeFi to become a bit more developed.

This is going to be an exciting decade!

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I think the DeFi situation will keep evolving and growing into a legitimate option for all individuals and entities. We will have to get through this insane phase, which will provide a great deal of innovation while also causing a lot of failure. That is just the process that is required.

Behind the scenes, there is a lot going on as evidenced by the link in the article. This is a company that is headed by people from the traditional financial realm who understand the shortcomings of that system while also knowing enough about blockchain and crypto to start the process of helping to erect a new one.

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Banks and Wall Street will never die as well as centralization. They'll adapt to the new circumstances and keep screwing people over and rake the profits. They have all the money and connections to do that. They're way ahead of the curve if you ask me.
Look at the leofinance and hive users for instance. Most of them are smart and crypto educated and know their stuff. They know markets, charts, trends. But unfortunately, most are broke and all they can do is talk. Swing trading, arbitrage trading, chasing low fees, and low gas...? For 8 bucks?
It's sad but that's what it is. And even if they'll score with their alt bags they'll blow the money anyway.
We just can't change human nature with the switch.
I really hope I'm wrong but I just try to be realistic here.

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That is what I find so weird as everyone talks about financial freedom yet they are so quick to cash out and blow what they have made. Many are slaves to greed and why they will never have financial freedom.

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For some that's financial freedom, getting a few bucks here and cashing out to buy what they need.

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@oldtimer, glad to see someone else pointing this it... it was a large part of what I was driving towards in my post yesterday: Banks and Wall Street can't stamp out what "we" are trying to do, so their next logical step will be to usurp what's being done with cryptos and finance... and the vast majority of the population lack the inclination, education and know-how to anything other than get involved in (centralized) Facebook Libra and (centralized) "BankofAmerica Coin" (when they get around to that) and we'll end up with something that looks a little bit different but basically doesn't change much.

Maybe in 50 years things will gradually change... which not to condemn or sideswipe what people are trying to do, but these efforts are still just fleas on the camel's back.

=^..^=

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The difference is on the back end. Much of what those institutions do is going to be replaced with a smart contract. There are already entities working in that direction.

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Banks and Wall Street will never die as well as centralization.

I disagree. These entities are already under attack from technology companies. Fintech already did severe damage to the banking industry with more expected. The link I provided is an example of one company, across many, that are taking aim at the banking industry.

This is going to put a hurting on the institutions that are in there.

GM was once the largest company in America; my forecast is they will have a tough time surviving the next 15 years. Sears was the first "virtual" sales company with the mail order; they are teetering on the brink of bankruptcy.

You are right about the people on Hive...they are not indicative, for the most part, of the ones who are changing the direction of things.

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Well, we'll see how it goes. But we don't need to worry. We own enough crypto.

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Honestly I don't see Libra being allowed to launch. It would make Facebook to powerful. Powerful enough to topple governments

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I am not sure they can stop it.

It is technically being released by the Libra Foundation, which is owned in part by Facebook. This is based in, I believe, Switzerland. There are other companies involved as validators for the network meaning, I presume, it will be global in nature.

Thus, I think the fact they are backing it with the USD appeases the EU regulators meaning they can release it there and the spread it.

It will be interesting to see how much resistance is put up especially by the US. Who knows, maybe the idea of Libra being an alternative to the Chinese CBDC is enough to get the US on its side.

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Maybe to compete with China.. but really I don't think the US government will let something out that they can't control.. although Zuckerberg could be in bed with the government... actually that would make sense

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It will be interesting.

I am of the belief that Zuckerberg feels is he untouchable including from the US government. Big tech is getting so strong that they can do what they want. After this election season, it is obvious they are not scared at all.

They went after the right but I am certain they will turn on the left when it suits them and eat them up too.

They are quickly becoming bigger than governments and they know it.

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Interesting, how Cresco Fin works.

What you have written here is a nightmare for the centralized banking system and the banks, for sure, only those will survive in the coming time who'd adopt the change in due time or at least try to adopt it even slowly starting from now.

You always open many doors to think, at least, for the in-experience people in the field, like me.

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Yeah I was surprised when I came across Cresco and what they are doing. It is really outrageous to see some of what is being done.

The founder of that is a guy who worked for...a bank.

A Swiss banker who started it.

This is where things are going.

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Thanks for the great article! There's always something to learn from your posts. I guess we need to keep an eye on companies like Cresco Fin.

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The best 5 minutes in the world, was a window to a better future where everyone has real power over

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I am strongly agree with you. where I can give you an example of a bank here in Bangladesh which has capital shortage of more than 7 billion US dollar. from a single country and buy a single Bank its use. we have some other examples like that and most of the cases the government banks are struggling to survive. and I am not a good expert in the field but I can easily understand the banking system is going to collapse within next decade. I am thinking this by judging surrounding people and environment from my perspective. thanks for sharing your Idea, thoughts and analysis on that case
Go go crypto

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It is necessary to mention the lawyers the large buffets of overwhelmed that are also entering the scene of financing some real estate projects but of course in this case their business is to steal people's properties, that they fall into default, but good if the financial system goes towards there and if they are not updated I think some will disappear, for now
I am a bit overflowing with offers offering credit cards and loans, I don't even know why since I am not subject to credit but they kind of have put them anywhere, sometimes I am scared to see how irresponsible they are being, I guess their figures They are already starting to fall and maybe soon they are thinking of having red numbers at the end of the year so they are trying to have a good placement by the end of the year.
For now, it is better not to approach the entities, you can go out spending what you do not have on things that you do not want.

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the banking system is bankrupt. In Italy in the last ten years many small banks have gone bankrupt, others have been absorbed.

There are new mergers between the major banks to keep the network alive but only for a short time

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The entire European banking system is a total mess. You are right, there is nothing that the Italian banks can do. They are at the mercy of the ECB which is constrained by Germany and France.

For close to a year I said watch the European banking system, this is where the issues are.

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Yes, I think you are right @taskmaster4450. Thanks for sharing the information and your work. Probably would not hurt to stack a few or these:
Eagle Dollar(2).jpg
or these:
Silver Maple 2.jpg
They are fun to look at, if nothing else.

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To be honest, mixed feelings on this.

For sure, we're going to see tremendous changes in how banking and finance will be transacted... just like PayPal represented "major change" when it came about and became a household concept.

But I also thing we'll find ourselves in the middle of a subtle movement towards something I might describe as "centralization that LOOKS decentralized." Around here we're all very educated and cutting edge... as are the 3-5% of the population who vote Libertarian or Independent in every Presidential election, and yet we still are stuck with a two-party system, even after decades of declarations that "the two party system has to end!"

The problem is that actually moving the opinions and habits of the broader populace is about as slow and cumbersome as watching turtles swimming in honey. And "centralization" has taught the sheeple to expect :log in the Facebook" ease-of-access, and the decentralized world can't offer that right now.

I remember my own hesitance and skepticism in even joining St€€mit... why the HELL do I need four passwords, and why the HELL do I have to spend several hours sending these tokens through a circuitous route just to end up with $12 to buy a pizza??? And I'm pretty persistant.

All I'm saying is, this is going to be a long hard slog.

But hey, it's part of my gig to play "Devil's Advocate!"

=^..^=

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Actually I think you are going to find the exact opposite.

Decentralized that looks centralized

This will be done through front ends that look like what people are accustomed to yet are actually tied to a blockchain. The users will not even be aware they are operating on a blockchain nor will they care. They will use the front end for the services needed and be done with it. Where the data resides will not be paramount.

It is like the company mentioned in here. If one deposits money, they get interest. Do they care that the money comes from receivables that are housed in a smart contract? Do they even know?

As long as they are getting their 3%, to them it is just another bank deposit.

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Banks have only have two options and that's to adopt established cryptocurrencies, or fund their own blockchain projects. Crypto is slowly growing and will be common soon enough.

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The big banks will always exist! They will evolve and change with the times.

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The big banks will always exist! They will evolve and change with the times.

They might or they might not. Just because they are big does not mean they will survive via adaption. General Motors was once the largest company in the United States and I forecast they will have a tough time being around by the end of this decade.

Many large institutions have bit the dust, especially when technology starting to pound every layer of their company.

This is what the banks might be facing.

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The only thing that might prop them up is that they got themselves labeled "too big to fail". So, the Feds might make an effort to keep the major banks alive.

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Being able to collateralise one's crypto assets is a huge deal. I wish we had some service like this on hive. In a country like mine where access to loans/liquidity is difficult, defi will breach that gap. this brig globalization into the picture. Irrespective of your location you have access to de-funds of which you can use to grow your business and the likes without having to pay so much in interest rates. This will signifcantly impact small economies across the globe.

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It will take a while for it to spread but my guess is it will not be a problem in another couple years (at most). There is a lot of development taking place focusing upon areas of need.

We will see what is done on hive over time.

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Owning certain tokens is like owning a stock of some company only it's more accessible to ordinary humans and I love it!

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While I am reading this article, I hear a message on the radio that ABN AMRO bank (One of the Netherlands' most famous banks) will cut 15% of its jobs from 2022 to save costs. They are in trouble that's for sure.

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What a great time to be alive and see this all unfold. I'm still at a phase learning the traditional banking system and now I'm sandwich at a generation where cryptofinance is slowly going to be part of the norm.

Crypto has convince me to put more of my future funds on it that ever before. I won't recommend anyone that has recently started their financial literacy journey to be on crypto. But I definitely would convince anyone that has established a good foundation on how money works to consider crypto. It's either adapt or get left behind.

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It's a 50/50 probability though.... Some banks will definitely evolve in order not to be totally out of de market. 👌
Not withstanding, this paragraph got me - ""Decentralized finance is going to be the basis for a new financial system. Simply put, it offers too many advantages over what we have now. This means that the incumbent institutions, those enormous entities that control trillions of dollars, will have to adapt or die. Unfortunately for them, their very existence is not really required.""

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Well, I actually wonder if we can get away from the banks in the long run. Frankly, I'm less pleased to hear that Deutsche Bank strategists are now raising the Crypto-Bullish flag and ultimately making the integration as a profiteer in this system.

Within a decade, much of the financial system will be decentralized. There is simply no way for the present establishment to stop this.

I hope that this statement will become reality and that no attempt will succeed to take over this new world with financial instruments based on the same technology. Perhaps in the long term there will indeed be a "fairer end".

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