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Traditional finance has produced many positive things, such as near-instant payments, intuitive mobile apps, etc. But on the other hand, its centralized and siloed infrastructures have created deep financial inequalities across geographic and cultural regions. About 1% of the world’s population owns over $87 trillion in financial assets, or over 43% of the world’s total financial wealth. Over 63% of their wealth is in financial assets, compared to 37% for the majority.
Blockchain can solve this problem. Popular inclusion is the ethos of decentralized wealth creation protocols and financial networks. But we should not take it for granted. Especially when traditional players like Blackrock, VanEck, etc., enter the space with a range of centralized products and ETFs.
Institutions are wielding a double-edged sword
In addition to macroeconomic factors such as moderating inflationary pressure, exchange-traded funds (ETFs) have played a crucial role in the return of bulls to cryptocurrencies. The optimism around these developments is understandable. Exposure to blockchain-based digital assets through familiar instruments could give mainstream users a stronger impetus to buy in.
Could this be the inflection point we’ve been looking for all these years? Yes. Provided we don’t inherit persistent problems like high barriers to wealth creation and instead maximize inclusion.
To get into wealth management firms in the United States, you need to have a minimum of $2 million to $5 million in investable assets. In contrast, large fund managers like Blackrock cater exclusively to high-net-worth individuals with portfolios in excess of $100 million. Only the world’s financial elite can meet either of these criteria.
It is unlikely that offering cryptocurrency-related products will automatically make established institutions more inclusive. Indeed, the roots of exclusive business models run deeper than the policies or intentions of any particular company.
The very structure of traditional financial systems, centralized and siloed, is inherently linked to the widespread disparity of information. This situation has developed over decades and has given rise to an uneven playing field that is rather difficult to correct. In fact, most attempts to find viable solutions within traditional financial paradigms have failed so far. For example, the STOCK Act failed to prevent insider trading by members of the US Congress. No member of Congress has been penalized under this law to date, mainly because it is very difficult to determine the scope of “material information” affecting a given transaction, despite centralized records.
There is no way that such clumsy approaches to ensuring a level playing field will work in the user-centric and pseudonymous world of blockchains. However, the underlying technology has unique capabilities to provide equal access to all while natively fostering fairness.
Wealth and financial freedom for all
Blockchain is one of the most effective technologies for equalizing wealth and access on the Internet. It brings new sources of income and new investment instruments directly to the average user. The particular dynamics of the current market cycle show this more clearly than ever. As Mike Mallazo recently wrote:
“The real egalitarian appeal of cryptocurrency is not that it will democratize payments, but that a ZYN-fueled, winter-green degenerate in his mother’s basement can outperform an MIT-trained quant who spent a decade at Goldman..”
Institutions have so far outpaced retail users on some fronts. At the same time, however, grassroots users are also generating life-changing wealth through memecoins and the like. For example, one trader recently turned $2,275 into $2.6 million in about eight hours (not financial advice). That’s pretty common these days.
This was possible because the barriers to entry are very low, if not non-existent. Anyone can start generating wealth with as little as they want. No gatekeepers. No questions asked. No minimum income requirements. The degen and the prince are practically on the same level.
Unlike fiat trading systems, blockchain-based financial networks truly offer outsiders a substantial and fair chance to get ahead. Even more so with advanced wealth generation protocols where an average user can earn millions by investing alongside the best asset managers.
The new paradigm of social investing paves the way for a meritocratic environment in which seasoned investors and amateurs can mutually benefit. While the former can monetize their proven strategies, the latter have a stress-free way to make a profit.
There is also an opportunity to create accessible wealth management systems that support a wide range of asset classes including meme coins, defi, NFTs, RWAs, etc. This will further democratize the space and unlock financial opportunities available only to the wealthy elite.
No matter who they are or where they are, everyone can become financially free thanks to blockchain-based tools. Users are the biggest winners of this evolution. This is the epitome of fairness.
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 when decentralized, community-driven systems are equally robust.
This is a battle of narratives and perceptions, where the fundamental voice of crypto must resonate louder than those who try to use the technology for selfish purposes. ETFs, etc., can attract new users, and that’s great. But native protocols and their communities must set the standards. We must not repeat the historical mistake of exclusion.
