DeFi: The Building of Networks And Why Hive Is Excelling

in #hive-1679222 years ago

As I look around the cryptocurrency industry, I am uplifted by what Hive is doing. When it comes to finance, Hive is taking the right approach. Few consider what our present financial system truly is. This is something we will undertake in this article.

To start, we have to applaud the power of blockchain. This innovation, brought about by Bitcoin, changed everything. One the solution was presented, the ability to expand upon it began. Of course, today there is a spaghetti of networks out there trying to duplicate the present system.

Hive is actually on path to accomplishing some of this.

We are going to delve into the networks of finance that are in operation and how they can be replaced.

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A Californian In Australia

Our story begins with an individual from California in Australia. This person goes to the automated teller machine (ATM) to get some cash. It is a process that occurs regularly, so often that nobody gives it any thought.

However, what truly happens when our traveler does this? How does the system work?

Here is where we get into the world of networking. As stated in the past, our monetary system is a combination of accounting and communications. The latter, in the 2020s, means digital networks.

For this single transaction to be completed, we have a host of networks in different engaging. As we will see, each is keeping a ledger.

There is the network that the ATM machine is tied to. If it is only a financial services company, it will be tied to a bank. This is network number 2. Of course, being in Australia, there is the Reserve Bank of Australia (that country's central bank).

To go overseas, we are going to have to deal with SWIFT, CHIPS, and/or ABS. Each of these has a network. Once inside the states, the Federal Reserve gets into the act. They have to account for all the money going between the banks.

Finally we get to the traveler's bank.

All of these networks were involved in this transaction. Of course, if the individual then goes to have lunch, and pays with a credit card, we can add Visa and the point-of-sale networks at a minimum.

This is our financial system.

It is a series of interconnected networks strung together. Things get only more complicated when we get into higher level transactions such as international derivative trading.

Needless to say, this is a very complicated way to do things.

The Power of Blockchain

Blockchain is a new electronic monetary system. Where Hive excels is through its decentralization. Bitcoin gave the world a decentralized electronic money transfer mechanism, a network not under the control of a single entity. Contrast this with all the networks mentioned.

With cryptocurrency, think of all the steps in the example above that are eliminated. For the lunch, we could legitimately cut it down to just the Hive network if payment is made with HBD (excluding the telco's network). A blockchain does not consider geographic location. It is not relevant. The only factor is having the private key to the wallet.

This is one of the reasons why base layer transactions are crucial. Being able to handle a medium of exchange reduces the complexity of the system by orders of magnitude. It is one area where I think Bitcoin is having issues. The network is not operating for this purpose, requiring the construction of another network to handle most monetary transfers. Of course, this runs the risk of having centralized nodes who take over the largest volume of transactions.

Once we consolidate all these networks into one, we have a robust payment system operating outside of the traditional financial institutions and banks.

This is the power of blockchain.

Layer 2

Here is where great measure is required. One of the keys to established a new financial system is to have decentralization at every level. As we learned in 2022, most of what was created, especially within decentralized finance, was nothing more than a repeat of what already existed. In short, we were just changing the names of the entities in control and the currency used. It ultimately was the same.

Sadly, we also got many of the same results as corporations such as LTCM, MF Global, and even Bear Stearns.

Second layer networks obviously should be tied to decentralized blockchains. We know this is getting harder to find due to the way those were set up. At the same time, these layer 2 nodes (or sidechains) have to be decentralized themselves. It does not go to centralize the process at this level. That creates just another vulnerability.

With Hive, we are seeing a couple projects that are focus upon exactly this. Once we see a smart contract platform incorporated, then we have the ability to create not only tokens but also full blown DeFi applications. This can be done without the centralization so prevalent in the world of finance.

We dove into Elon Musk and his goal of turning Twitter into a financial platform. If we look at it from a network perspective, he is not changing things a great deal. If the person in Australia example was using Twitter, it might remove a couple steps yet still would have most of the same players involved.

With Hive and a couple layer 2 applications, things could be radically changed.

Wall Street

We know the financial arena is dominated by Wall Street. Some of the biggest names in the history of banking, finance, and money are located there. We think of these firms as financial institutions but are they?

If money is really the combination of accounting and communications, aren't the largest money players really nothing more than digital networks? We covered in the past how Visa is really nothing more than a computer network. That firm spend billions over the decades creating this interconnected system that covers much of the world.

Using the same analysis as before, consider how much is involved in a single stock trade. How many networks are required there? We will not repeat the process in this article since the point is clear.

When it comes to finance, networks are plentiful, convoluted, and involved in everything we do. Of course, each of these is a financial intermediary, requiring permission to be on their network. The transactions could be rejected anywhere along the way.

As much as Wall Street wields a great deal of power due to the monetary might, it could be their digital networks that make that mammoth. Controlling the network means one makes all decisions. This point should be clear.

The way to take down Wall Street is to build applications on networks that are not controlled. Here is the major contrast. If cryptocurrency is truly going to take over, the networks have to be different. Replicating the same thing means cryptocurrency loses.

When major players are benefitting from the status quo, we can see that disruption comes from going over and above what is in place.

In this era, finance is more about the networks than it is money.


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DeFi makes all financial tools 100x better and I honestly see no way WS can compete on any level.

Sure, they will have their own private blockchains and sell them as a product to the gullible but eventually, a few transactions will have to be censored and the scam will be over.

It's not a competition anymore. DeFi and crypto won, we just need time for nature to heal.

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I agree. It will take a lot of infrastructure built in the proper manner. However, true DeFi cannot be stopped in my opinion.

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Hive may be excelling in terms of the blockchain technology and financial sectors where decentralized measures are operating to fast transact crypto wealth. The smart idea of such infrastructure are great having a secure wallet to hold them up. But, communities arent getting the attentions needed to foster growth and so fare we have seen quite minimal number of people outside crypto realm are getting into the system compared to twitter and other social media platforms.
Thats where it should improve time to time.
👍

Communities are powerful and we can see some great things coming from them. Unfortunately, we still need more infrastructure for them to have the tools needed to excel.

At this moment, a fast and inexpensive way to spin up tokens is required. This will be part of the smart contract platform. Hopefully is appears this year.

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I agree. We need to build on alternative systems where they have less control. This is the only way for us to get away from the system and crypto is the best way to do so.

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I haven't traded stocks for a long time. I have not traded cryptocurrencies on exchanges for a long time. I haven't traded on Uniswap for a long time.
Because there is Hive!

Well Hive is rather limited but we are working on it. We will see what comes out of the development within the next few years.

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thank you very much, every time I read one of your articles I always learn something new!

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DeFi is simplifies the process in a 'secure' way without the need for any intermediary. The technology is definitely better than the standard that's out there and I think that's no why Wall Street wants to join in on the crypto space. They want to have (and control) a piece of the pie.

Wall Street wants to take it over.

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Right. Will they ever succeed in taking it over? What's the probability of them succeeding.

That layer 2 stuff is really going to kick things into overdrive huh? I haven't heard much from the DLUX project lately, but I know they are still out there because I keep getting my dividends for delegation and I know they are working closely with the SPEAK people I think.

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I would presume Disregard is still hacking away at code. Last I heard he was working on multi-sig wallets which could really make things very interesting.

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You are likely correct. That would be cool if he can get it up and running.



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One of the reason I quit out of my country's stock market was because of some of these issues. I had to call the operator, than wait for him to be free and ask him what was the price and later he would say this and that and later on I would have to out a buy order. I had to go through the process several times on order to get something I want. It was both tiring and also time consuming.

With crypto, so many lines have been cut and now I can do whatever I want. Hive being on the pipeline is also making a huge difference for us all. One day, all it would take us (hive users) just a click and to either send, trade our crypto. Once we go the board of adoption ;)

I think it is the case with FinTech in general. Blockchain is the next iteration of that.

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