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However crypto has gained a lot of popularity and the ability to preserve a considerable size of the user base, still, it seems far behind the expectations of possibilities made by pro-crypto users it can achieve
It’s a far accepted fact that traditional finance mechanisms have a lot of flaws and drawbacks for which blockchain tech-based cryptocurrencies economy is seen as an alternative.
At its full potential crypto might get a huge advantage over traditional finance systems. Some assume so far that it might take over the latter. On the other hand, it’s also important to understand how far crypto stands from the milestones set by financial institutions in decades’ time.
In the recent past, the crypto market had put huge capital into various new financial systems like Defi, crypto indices, decentralization-based insurance products, and many more. Reports stated that alone the Defi sector including all networks have total value locked, growing from $18 billion in 2021 to more than $240 billion in 2022. Clearly, a huge jump in value shows the number of people surfing the crypto waves.
Another aspect of the financial system includes lending, so for crypto lending, the amount was $60 million at the beginning of 2021 which increased drastically and now stands at approx $400million in value. Although it’s still limited to collateralized loans, be it token collateral and recently NFT, but expected to innovate with time.
But still, there are some aspects where crypto can tap and acquire more traditional financial system users. For this reason, we need to get rid of misconceptions about crypto, like only being able to buy NFTs, staking in networks, Defi products, etc.
Cryptocurrency should behave like a currency
If we see a traditional market, we observe almost everything has definite value and quantity. It’s true for both goods and services and currencies for which they can be traded. But when you see in the crypto market the previously explained concept seems not applied completely. You have a lot of options of cryptocurrencies available in comparison very less number of tradable assets. This thing needs to change in order to compete with the traditional market which is free from these sophistications. Currency has only motive to get exchanged against a good or service, simple. So cryptocurrency needs to diversify its use cases in terms of purchasing after all that’s what currency does.
Do better, what it’s already doing
As we discussed earlier, crypto lending services are also in existence and growing better. But still, it needs to work on some areas where the traditional finance system does better than crypto. If we recall a loan procedure in the banking system, it can provide you with a suitable amount of loan by considering your good credit score. That means to be eligible to lend money a person just needs to proactively manage his account and be good to go.
Now on comparing banking loans with crypto lending, the latter process on collateral. So to get any loan in cryptocurrency any person has to put in either another cryptocurrency or any digital asset value more than the lending amount. In case the loan amount gets defaulted or fails to pay back, his belonging collateral will be sold to get payback.
The traditional finance system still takes advantage here where the borrower can avail loan just on the basis of his good performance in his finances. For Crypto lending, this gap is still needed to make the process easier and open to more people.
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Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
