You’ve definitely heard the phrase “be your own bank” or the word “bankless” if you’re a big enough fan of crypto to have heard either of those terms. The premise behind these phrases is that crypto may give more control over your financial future than traditional banking can. But how much of your actual financial life can you truly get done using cryptocurrencies?
The response is… A lot! A wide variety of DeFi protocols, fintech firms, and cryptocurrency-first companies like Coinbase are forming an infrastructure for cryptocurrencies that can serve as an increasingly viable alternative to the traditional financial system. This infrastructure is being formed as a result of the growth and evolution of the cryptoeconomy. And because most traditional banks now provide interest rates that are close to zero, cryptocurrency presents an appealing option.
The cryptoeconomy is fast testing many of the fundamental concepts around what money is and how it may be put to use. Some examples of these challenges include crypto direct deposits and debit cards, decentralised saving and lending, and international payments. The following is a list of ways in which you may become involved:
It is becoming simpler to convert fiat cash into cryptocurrency as a growing number of cryptocurrency and fintech businesses, including as Square, Paypal, and Binance, are offering the option to directly deposit monies into their respective platforms. Coinbase has also began rolling out the capability to accept direct deposits into your account, which opens the door to the prospect of more smooth cryptocurrency exchanges, spending via the Coinbase Card (a Visa debit card attached to your account), earning crypto rewards, and other features. You have the option of having your paycheck deposited in either cryptocurrency or US dollars, and you may pick how much of your paycheck to deposit depending on your needs at any given time. All of this is free of charge.
Traditional financial institutions are even starting to incorporate cryptocurrency straight into customer accounts. In September 2021, with the assistance of Coinbase, Vast Bank became the “first federally chartered bank in the United States to offer the ability to buy, sell, and custody cryptocurrencies - directly from a checking account - all under one roof.” This achievement was made possible by the bank’s “all-in-one” cryptocurrency platform.
As soon as you have any cryptocurrency in your possession, you will most likely find yourself asking the following question: how can you use it?
The process of “linking crypto and blockchain networks to its trusted, global payment network” has made great headway thanks to Visa’s efforts. At the moment, Visa has more than 50 crypto wallet partners, each of which may connect to more than 70 million merchants around the world. Visa said that during the first half of 2021, it has successfully handled cryptocurrency payments totaling more than one billion dollars.
Additionally, Mastercard has shown support for cryptocurrency. Bloomberg published an article in July 2021 stating that Mastercard is looking on ways to make it simpler for customers to purchase, spend, and keep cryptocurrency. And soon, businesses that are part of its network will be able to accept cryptocurrency payments.
A “Proof of Stake” consensus method is now used by the majority of cryptocurrencies. This mechanism provides a technique for decentralised networks to ensure that all transactions are confirmed and protected without the need for a bank or payment processor to serve as a third party.
By placing a portion of your holdings into a staking pool for a predetermined amount of time and “locking” them there, users of certain cryptocurrencies have the opportunity to receive rewards for doing nothing more than contributing to the safety of the network. If you want to keep the cryptocurrency for a longer amount of time, this is a great choice to consider since you can put it to work for you instead of letting it collect digital dust in your wallet.
The fact that staking incentives are paid out in the network’s native cryptocurrency, which is subject to price fluctuations, is one of the possible drawbacks of these payments. You may, however, acquire rewards that are denominated in dollars only by purchasing and holding stablecoins such as Dai and USD Coin (USDC).
As of November 2021, Coinbase announced that you can earn 2.00% APY rewards by simply holding Dai in your Coinbase account or 15% annual percentage yield for keeping USD Coin.
Traditional savings accounts often provide very low interest rates, which means that the value of your money will decrease over time due to the impact of inflation. If you are searching for a greater income and are ready to face the increased risks that come with new financial technology, then decentralised finance protocols might provide a viable option for you.
Peer-to-peer lending that is transparent and can possibly give better rates than typical financial products is made possible by DeFi protocols, which make use of smart contracts. In this scenario, you lend your crypto assets to other users so that they may borrow them from a liquidity pool. As a result, you make a return on your investment. When lending stablecoins such as USDC using popular protocols like as Aave and Compound, users of the DeFi platform may potentially earn returns of up to 11% beginning in September 2021. (You may also lend and borrow a broad variety of cryptocurrencies, including Bitcoin and Ethereum that have been wrapped.) There are potential dangers associated with using DeFi; thus, you should investigate any protocols that you want to entrust with your cryptographic information.
You will require a self-custody cryptocurrency wallet in order to use DeFi applications. Some examples of self-custody cryptocurrency wallets are Metamask and Coinbase Wallet. These digital wallets are more than just storage spaces for one’s possessions. They also provide you the ability to transfer and receive cryptocurrency, but more crucially, they give you the ability to find and use a wide variety of cryptocurrency applications, ranging from games to NFT markets to DeFi.
According to a study, it is said that you can get a line of credit without having to deal with DeFi applications. Without having a good credit score, you can borrow up to $1 million from Coinbase by utilising your cryptocurrency holdings as collateral. This service is available to residents of numerous states in the United States.
One of the most ground-breaking aspects of cryptocurrencies is the fact that it is completely unrestricted by national boundaries. El Salvador made history by becoming the first country in the world to recognise Bitcoin as a form of legal cash in September 2021. This move was likely motivated by a desire to minimise the cost of remittance payments, which are payments sent home from loved ones who live in other countries. Only on October 15th, the official Bitcoin app for the country, Chivo, has already handled more than $3 million worth of remittances. It is game-changing for people living in poor economies, as well as for their relatives and friends who live in other countries, to have the capacity to transmit funds across borders almost immediately and at little cost. Imagine a world in which anybody with a smartphone could connect to a global monetary system and utilise decentralised services for borrowing and lending money.
Traditional remittance payment processors may be extremely expensive in many underdeveloped nations; hence, bitcoin is becoming an increasingly attractive alternative. Chainalysis, a supplier of research and analysis on cryptocurrencies, believes that emerging nations such as Vietnam, India, and Pakistan are leading the globe in the adoption of cryptocurrencies.
Facebook, which is now known as Meta, made the announcement in October that it will be collaborating with Coinbase and Paxos on a new digital payments venture known as Novi. The initial trial for Novi will let users to move cryptocurrency between the United States and Guatemala in an instant, in a safe manner, and without incurring any costs.
There are two possible ways forward. It is quite possible that cryptocurrency will become more integrated with regular payment channels as well as the infrastructure of banks. Additionally, decentralised protocols will become an increasingly feasible option in the future.
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