Communities are inherently valuable. They bring together members’ resources, skills, knowledge, and experiences to create value for members and other people who engage with them. From crowd-sourcing advice to supporting non-profit causes and even reality show favourites, communities have historically been used to accomplish and advance all kinds of goals. For instance, in many African societies, community-based initiatives like cooperative societies are an age-long vehicle for enabling millions of unbanked people to access credit and other financial services.
As we have spent more of our time on the internet over the last few years, we’ve created and established more of these communities online. We’re part of groups on WhatsApp, Facebook, Reddit, Quora and so on. These internet-based communities are able to leverage even more resources and run more efficiently because there are no geographical boundaries to membership. People from different backgrounds can bring diverse perspectives and skills to make their communities more valuable. The influence and value of these communities are also able to reach more people worldwide. Communities no longer have to be made up of just people who look like us; they can be formed around more diverse factors like ideologies, hobbies, and even arbitrary interests.
To understand Decentralized Finance (DeFi) and why it exists, it’s essential first to understand the purpose of “Traditional Finance” (TradFi), particularly as it relates to the capital market. This is necessary because, for the most part, the capital market is what DeFi disrupts today.
Finance in this context refers to channelling financial resources from suppliers of capital (people who have more money than what they need to spend immediately) to people who need capital, such as businesses and governments. For instance, if you have $2,000 saved up and a business needs $100,000 to run, the job of the players in the capital market such as banks and stockbrokers is to figure out how to collect this money from you — through products like savings accounts and pension funds — and give it to the business that needs capital. Ideally, the business uses the funds productively and then gives you some of the returns generated.
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As we begin to see more mainstream use cases of blockchain technology in payments, gaming, art, and even social media, it’s becoming really important to further simplify the user experience of crypto in general — starting with addresses.
A couple of days ago, I was talking to someone about how fascinating I find decentralized wallets. This article is my attempt at explaining cryptocurrency wallets so you get a sense of what goes on under the hood; and how to think about them in the new decentralised world.
To most people, wallets are apps used to store and transfer cryptocurrency, possibly through cryptocurrency exchanges. Interestingly though, when people in the crypto space talk about wallets, they’re generally not referring to the kind that you get from a cryptocurrency exchange like Buycoins or Coinbase: those are custodial wallets. Instead, they’re referring to what is most commonly known as non-custodial wallets.
NFTs (Non-Fungible Tokens) are the new wave in the cryptocurrency space. Over the last few months, they have opened up new channels for digital creators to monetize their work.
An NFT is basically a record of a unique item on the blockchain. You can make an NFT for anything; art, music, memes, even a selfie. NFTs can be sold and traded by people all over the world, and their sale recorded on the blockchain. While these digital items can be copied and used by other people on the internet, the appeal of owning an NFT is that there remains a permanent record on the blockchain of the creator of the art, its current owner and the chain of ownership.