The Potential Safety of Crypto Over Traditional Finance
Approval of Ether and Bitcoin ETFs
The U.S. Securities and Exchange Commission has approved Ether and Bitcoin ETFs, and the U.S. House passed the FIT-21 bill with bipartisan support. These steps are perceived as part of an ongoing experiment to determine if regulation can mitigate risks in the crypto sector and stabilize the digital asset market.
The Concept of Self-Custody
A key concept in the discussion about crypto safety is “self-custody.” This allows individuals to maintain control over their own assets and data during financial transactions without relying on intermediaries like banks, exchanges, or web companies.
Public Perception Shaped by Scandals
Many people’s opinions about crypto are influenced by high-profile scandals, such as the collapse of Sam Bankman-Fried’s FTX or the money laundering conviction of Binance CEO Changpeng Zhao. These incidents are more reflective of human nature than of the inherent risks of crypto itself.
Lessons from the 2019-2020 Bull Market
During the 2019-2020 crypto bull market, developers aimed to create user-friendly crypto applications. Unfortunately, this often meant sacrificing self-custody and relying on large centralized exchanges like FTX. This approach combined the worst risks of Web2 fintech with the unresolved issues of Web3, leading to disastrous outcomes for companies, investors, and customers.
Traditional Finance Failures
Crypto does not hold a monopoly on financial failures. The ongoing case of Synapse Financial Technologies, a non-crypto intermediary platform, highlights issues of trust and custody. Synapse’s downfall has left millions of depositors potentially losing hundreds of millions of dollars, illustrating that traditional finance is also prone to spectacular failures.
Advantages of Blockchain Technology
Blockchain technology offers significant advantages over traditional fintech. As a former product expert for companies like Braintree, Venmo, and Paypal, I have seen how blockchain enables faster and leaner development. It inherently addresses fintech challenges like data security, payment integrations, and custody of funds.
The Maturation of Crypto Infrastructure
The latest generation of crypto-powered applications benefits from advanced technology that simplifies complex details, providing user-friendly interfaces while maintaining self-custody. This maturation means crypto apps can now offer a seamless Web2 experience without the risks posed by centralized entities.
The Future of Crypto in Mainstream Finance
Developers and crypto entrepreneurs are excited about the future of digital assets. As crypto becomes safer, faster, and easier to use, it aims to refine itself out of the average user’s experience. This intentional invisibility is a key goal for crypto’s integration into the mainstream financial system and everyday life.
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