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Traditional finance has brought about a lot of good things, like near-instant payments, intuitive mobile apps, and so on. But on the other hand, centralized and isolated infrastructures have created deep financial inequalities across geographic and cultural boundaries. About one percent of the world’s population owns more than $87 trillion in financial assets, or more than 43% of total global financial wealth. More than 63% of their wealth consists of financial assets, compared to 37% for the majority.
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Blockchain can solve this. Grassroots inclusion is the ethos of decentralized wealth generation protocols and financial networks. But we shouldn’t take it for granted. Especially when older players like Blackrock, VanEck, etc. enter the space with a range of centralized products and ETFs.
Institutions wield a double-edged sword
In addition to macroeconomic factors such as moderating inflationary pressures, exchange-traded funds (ETFs) have been crucial in bringing the bulls back to crypto. The optimism surrounding such developments is understandable. Exposure to blockchain-based digital assets through well-known instruments could give mainstream users a stronger impetus to get involved.
Could this be the turning point we’ve been looking for all these years? Yes. As we do not inherit persistent problems such as high barriers to wealth generation, and instead optimize for inclusion.
A minimum of $2 to $5 million in investable assets is required to gain access to asset managers in the US. While large fund managers like Blackrock exclusively serve high-net-worth individuals with portfolios of more than $100 million. Only the global financial elite can meet any of these criteria.
It is unlikely that offering crypto-related products will automatically make established institutions more inclusive. Because the roots of exclusionary business models go deeper than the policy or intent of this or that company.
Widespread information inequality is inherent to the structure – centralized and siled – of traditional financial systems. This has developed over decades and has created an uneven playing field that is quite difficult to resolve. In fact, most attempts to find viable solutions within existing financial paradigms have failed so far. For example, the STOCK Act failed to stop insider trading by members of the U.S. Congress. To date, no member of Congress has been punished under this law, largely because it is very difficult to determine the scope of “material information” that affects a particular trade, despite centralized ledgers.
Such half-baked approaches to ensuring a level playing field could not possibly work in the user-centric and pseudonymous world of blockchains. However, the underlying technology has unique capabilities to provide equal access for all while supporting fairness.
Wealth and financial freedom for everyone
Blockchain is one of the most powerful technologies for equalizing wealth and access since the Internet. It brings new revenue streams and investment tools directly to the average user. The peculiar dynamics of the ongoing market cycle make this clearer than ever. As Mike Mallazo recently wrote:
“The real egalitarian appeal of crypto is not that it will democratize payments, but that some evergreen, ZYN-fed degenerate in his mother’s basement can outperform an MIT-educated quant who spent a decade at Goldman..”
Until now, institutions have preceded retail users on certain flanks. However, at the same time, grassroots users are also generating life-changing wealth through memecoins, etc. For example, a trader recently turned $2,275 into $2.6 million in about eight hours (not financial advice). It’s quite common these days.
This was possible because the barriers to entry are very low and virtually non-existent. Anyone can start their journey to wealth generation with as little as he or she wants. No gatekeepers. No questions. No minimum income requirement. The epee and the prince are practically on the same plane.
Unlike trading systems, blockchain-powered financial networks actually offer underdogs a substantial and fair opportunity to rise. Especially with advanced wealth generation protocols, where an average user can make millions investing alongside top asset managers.
The emerging social investing paradigm unlocks a meritocratic environment where seasoned investors and amateurs can mutually benefit. While the former can make money with their proven strategies, the latter get a stress-free way to make profits.
It is also possible to build accessible asset management systems that support a wide range of asset classes including meme coins, defi, NFT, RWA, etc. This will further democratize the space and unleash financial opportunities available only to the wealthy elite .
No matter who or where they are, anyone can become financially free using blockchain-powered tools. Users are the biggest winners in this shift. That is the epitome of honesty.
Last but not least, a robust blockchain-native infrastructure is the way to offset the potential negative impact of widespread institutional adoption. We will only fully realize the benefits of greater institutional participation if decentralized, community-based systems are equally strong.
It is a battle of narratives and perceptions, where the core voice of crypto must be louder than those who seek to misuse the technology for selfish interests. ETFs, etc. can bring in new users, which is great. But indigenous protocols and their communities must set the standards. We must not repeat the historic mistake of exclusion.
Read more: The Implications of the Ethereum ETF and Beyond | Opinion
Abdul Rafay Gadit
Abdul Rafay Gadit is the co-founder of Zignaly.com. He believes in a world where financial independence is a necessity and not a luxury. Rafay, an ex-corporate banker with six years of experience at Standard Chartered, is now fully committed to building ZIGChain, Zignaly’s Layer-1 blockchain. Its mission is to unlock opportunities to generate prosperity for all. ZIGChain provides an infrastructure for developers to build protocols that can be used by fund managers and seamlessly accessible to the retail investor population.