TradFi is the traditional financial world. It lacks inclusion. According to the data published and endorsed by the World Bank, only 69% of the world’s adult population has an account. Financial inclusion is a key enabler in seven of the seventeen Sustainable Development Goals. Yet, over 1.7 million people still lack access to financial services. Inclusion is a result of the TradFi’s own entry barriers. These include unnecessary documentation requirements, the involvement of many intermediaries and the approvals of the process.
Brian Pasfield is the CTO at Fringe Finance. He believes that current financial systems are flawed. In an interview with beINcrypto’s Alexandra Kons, Brian said that his observations held ground for other segments as well, including gold, commodities, silver, metals, energy markets, and so forth. He said that this “gave him a bit of an insight at how things operated at a global and macro scale.”Brian believes decentralization in financial systems is an imperative, not an option.
A catalyst for decentralization
It was devastating for the United States, costing $22 trillion in economic losses. These losses would amount to $72000 on average if they were distributed equally among all Americans. This crisis showed that not all financial institutions are in control of the world’s financial environment. The global GDP dropped by 4.4% across all countries, a result that is still evident a decade after the crisis.
In the chaos of the moment, it seemed impossible to find a solution. Bitcoin was created in order to move the world toward decentralization. Bitcoin, a breath of fresh air, was truly independent, and its value wasn’t linked with the situation in any particular country.
Brian also realized that Bitcoin was different from the rest of financial systems. While talking about Bitcoin, he said to Alexandra Kons that “it represents opportunity. Its decentralization, uncensorability, a limited supply, ushered in a way to transfer value.”
He added: “Of course, it (Bitcoin) is the first underlying component that will manifest into a truly decentralized and distributed world.”Brian also believes that Bitcoin is a great option to allow people to choose in, rather than being forced into it by legacy centralised institutions.
This is the first level of value transfer
Bitcoin and other cryptocurrencies have started a revolution that isn’t stopping any time soon. For example, Decentralized Finance is transparent and easily accessible. This quality is rare in financial services provided by central institutions.
Brian: “in DeFi, people can take part in financial services, and they do not require any permission, and (it works) in a manner that is uncensorable and (lets them) access the whole host of financial services that otherwise they would not have been able to take advantage of.”
A new era?
Brian says that it’s a major game-changer to see mechanisms evolve around pseudonymous identities and reputations. He says it’s because “this usher in a new era where individuals and organizations, particularly DAOs, will now be able to undertake dispute resolution in a pseudonymous manner.”
He also states that “dispute resolution will be based on maintaining users’ reputation because their reputation will be the largest part of the currency of their ability on a continuing and evolving basis within the decentralized domain.”
The effect of this is to add force or compulsion that they can use for enforcement rules in the decentralized space. “Reputation will be a key driver for that,”Brian.
Brian also stated that people can trustlessly interact with the web once pseudonymous systems exist. This will allow DAOs and users to communicate with each other and to listen to and decide disputes. The implications won’t be physical per se, but they will impact the reputation that a user will wish to retain.
Today’s real-world examples of good reputation
If we look at it from the perspective of an individual, it isn’t as if reputation is not already a part of the traditional financial space because it already is, and it is known as a “Credit Score.” Yes, a credit score is on similar lines to reputation, as it influences the chances a person will be able to avail of loans or not. However, credit scores do not serve as a way to gain entry into a wider population. DeFi reputation is not prohibitive but it can be empowering. You will be able to access uncollateralized loans without permission and other web services.
Image: Pixabay
