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Traditional finance has produced many good things, like near-instant payments, intuitive mobile apps, etc. But on the flip side, its centralized and siloed infrastructures have created deep financial inequalities across geographical and cultural lines. Roughly one percent of the world’s population owns over $87 trillion in financial assets, i.e., over 43% of the total global financial wealth. More than 63% of their wealth is in financial assets compared to 37% for the majority.
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Blockchain can fix this. Grassroots inclusion is the ethos of decentralized wealth-generation protocols and financial networks. But we mustn’t take it for granted. Especially when legacy players like Blackrock, VanEck, etc., are entering the space with a range of centralized products and ETFs.
Institutions wield a two-edged sword
Besides macroeconomic factors like moderating inflationary pressure, exchange-traded funds (ETFs) have been crucial in bringing the bulls back to crypto. The optimism around such developments is understandable. Exposure to blockchain-based digital assets through familiar instruments could provide mainstream users with a stronger impetus to join.
Could this be the inflection point we’ve been chasing all these years? Yes. Given we don’t inherit persistent problems like high barriers to wealth generation and optimize for inclusion instead.
One needs a minimum of $2 to $5 million in investable assets to access wealth management firms in the US. Whereas big fund managers like Blackrock exclusively serve high-net-worth individuals with portfolios above $100 million. Only the global financial elite can meet either of these criteria.
It’s unlikely that offering crypto-related products will automatically make established institutions more inclusive. Because the roots of exclusionary business models run deeper than this or that company’s policies or intent.
Widespread information disparity is inherent to the very structure—centralized and siloed—of traditional financial systems. This evolved over decades and led to an uneven playing field that’s rather challenging to fix. In fact, most attempts at finding viable solutions within legacy financial paradigms have failed so far. For example, the STOCK Act couldn’t stop insider trading by members of the US Congress. No Member of Congress has been penalized under this Act to date, mainly because it’s very challenging to determine the scope of ‘material information’ affecting a given trade, despite centralized ledgers.
There’s no way such half-baked approaches to ensure a level playing field would work in the user-centric and pseudonymous world of blockchains. However, the underlying tech has unique capabilities to provide equal access for all while supporting fairness natively.
Wealth and financial freedom for all
Blockchain is one of the strongest wealth and access equalizing technologies since the Internet. It brings novel revenue streams and investment instruments directly to the average user. The peculiar dynamics of the ongoing market cycle are making this clearer than ever. As Mike Mallazo recently wrote:
“The real egalitarian appeal to crypto is not that it will democratize payments—but that a wintergreen ZYN-fueled degenerate in his mom’s basement can outperform an MIT-trained quant who spent a decade at Goldman.”
Institutions have forerun retail users on certain flanks so far. Parallelly, however, 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 rather common these days.
This has been possible because the entry barriers are very low and almost non-existent. Anyone can start their wealth generation journey with as little as they want. No gatekeepers. No questions. No minimum income requirements. The degen and the prince are practically on the same plane.
Unlike tradfi systems, blockchain-powered financial networks truly offer the underdogs a substantial and fair chance to rise. More so 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 benefit mutually. While the former can monetize their battle-tested strategies, the latter gets a stress-free means to profit.
It’s also possible to build accessible wealth 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, everyone can become financially free using blockchain-powered tools. Users are the biggest winners in this shift. That’s fairness epitomized.
Last but not least, robust blockchain-native infra is the way to offset the potential negative impact of widespread institutional adoption. We will fully leverage the upsides of greater institutional participation only when decentralized, community-oriented systems are equally strong.
It’s a battle of narratives and perceptions, where crypto’s core voice must ring louder than those trying to misuse the tech for selfish interests. ETFs, etc., can bring new users, and that’s great. But native protocols and their communities must set the standards. We mustn’t repeat the historic mistake of exclusion.
Read more: The implications of the Ethereum ETF and beyond | Opinion
Author: Abdul Rafay Gadit
Abdul Rafay Gadit is the co-founder of Zignaly.com. He believes in a world where financial independence is a necessity, not a luxury. Rafay, an ex-corporate banker with six years at Standard Chartered, is now fully dedicated to building ZIGChain, Zignaly’s Layer-1 blockchain. His mission is to unlock wealth-generation opportunities for everyone. ZIGChain provides an infrastructure for developers to build protocols that can be utilized by fund managers and accessed seamlessly by the retail investor population.