Written by Charles Sewela
Investing is an integral part of growing wealth over time. This is common knowledge. However, for the longest time, the space of investing has been left to pension fund managers, hedge fund managers and other financial managers in. While this has proven (somewhat) effective in growing the wealth of investors, ultimately those who manage these funds often make clients sign contracts that bind said client to making annual or monthly obligatory payments, subsequent failure of which could often see such investments “lapsing”. Others have seen clients place their money in the custody of commercial banks in mid and long term investment options. Most of which is then used as loans or as means of investing in property and other forms of income generation which ultimately benefits the bank far more than it benefits the investing clients, with the client seeing meager 4 to 8 percent returns annually, with all natures of added penalties/charges for early or emergency withdrawals of one’s OWN MONEY.
Investing in cryptos, individually or as collectives could vastly reduce the amount of money going to Mr. Big Bank, and see more returns reverting back to the common man. How so? There are a number of possibilities, some of which have already proven successful within the conventional financial environment.
From Stokvels, to pension funds, to buying income-generating property and assets offshore (as hedge funds do), to making investments in local businesses as investors and subsequent shareholders, to simply buying and holding cryptos and eventually selling them at profit when the value increases relative to the local currency. There are plenty of applications that can be applied to the generation of wealth within the cryptocurrency markets that can then translate to wealth in the common man’s pocket; with a lot more freedom to the investor to withdraw upon need, and deposit at will. This is not to say that cryptos are a be-all-end-all of financial markets. No, instead, the new and developing frameworks that have come to the fore with the advent of cryptos and crypo-driven business have opened up a pandora’s box of opportunities to make money (or be scammed of money) in a host of new-age ways that governments are yet to effectively regulate/stifle to the benefit of the oligopoly industries of global financiers and bankers.
Modern governments regulate the means by which money is generated, the means by which money flows into the hands of the public (initially through bank loans at the genesis of the economy), the means by which that money flows back to the state (through taxes) and the means by which the value of that money is set, changed and maintained. Examples of this can be seen in the financial policies set by central reserve banks, which are, more often than not, private entities with private boards and shady, questionable mandates. These reserve banks are usually backed by a state’s monopoly on violence (state’s policing and military authority), and international consensus by markets which are ultimately regulated by both private and public agents of those reserve banks (think state treasury committees, entities responsible for setting financial regulatory policy, ratings agencies responsible for informing market sentiment, etc.).
The decentralized and, often, pseudo anonymous nature of decentralized digital currencies means that money supply has, for the first time (quite possibly in all of human civilized history) been democratized. The establishment of market sentiment, value consensus and, most tellingly, money supply are all functions of the digital/internet public when it comes to the cryptocurrency sphere. This in itself is quite possibly one of the most sophisticated coups on financial markets ever perpetrated by the general public, subverted only by that same public’s lack of realization of the magnitude of this fact and situation. The financiers and state authorities of some nations (most notably China) have awoken to this reality and have begun to crack down on the cryptocurrency markets and the platforms that power them in the country (remember ‘state monopoly on violence’?). Others have been slower to react, relying on the public’s complacency and ignorance to the reality begging at the door.
The size of the network that drives a digital currency is a measure of the robustness of a currency, while the number of transactions that take place on that network is a measure of the public’s support and adoption rate for that currency, this is what we can alternatively refer to as the value consensus (the publicly and generally agreed upon value). Where a currency has the support of a community, that currency has power. As opposed to power by monopoly on violence, such a currency has power by community adoption and confidence; living and dying by market consensus, rather than living and dying by the gun of the state.
Some of the concepts that make crypto currencies so attractive include the ease of transfer from one account to another, the ability to divide a currency unit into fractions for trade and exchange purposes and the low cost of transferring a unit or its relative fractions. However, one of the most telling and most important value propositions to date is that of anonymous transactions. The idea of being able to safely and anonymously exchange value between two parties is important. This serves as a means of firstly, protecting parties to a transaction from traceability and economic persecution. It also serves to ensure transactions are private and the digital assets of an individual or entity are safe and cryptographically secured. What this suggests is that a holder of digital assets need only secure the address of their wallet (where their value is held) and the password that grants access to that wallet. They need not provide individually identifying information that would ultimately compromise anonymity. The reverse side to this is that transactions can in most cases with most currencies be traced back to an address but the owner of said address does not necessarily need to be public knowledge.
This implies that one can found, for argument’s sake, a stokvel group (some or other form of investment or community fund), with group participants from anywhere in the world. The finances of that fund group could be managed by a trusted third party such as a reputable online platform that will dispense the contributions to recipients according to agreed, transparent schedules, with beneficiaries stating accurately their receiving addresses. Checks and balances around how to successfully, safely and confidently implement business policies with regards to such applications would simply be a matter of formality.