Difficult Times Await Cryptocurrency: When Is the End of the Decentralization Era? Vladimir Okhotnikov About Digital Chaos

• “Fiat money is much more at risk today than ever before. Although, of course, at first glance this may seem strange, given their wide distribution and historical adherence. However, there is more and more currency, and its value is falling,” Vladimir Okhotnikov, an ardent crypto-enthusiast, convinced of the need for decentralization of all spheres. 

With his сlose look Vladimir assesses the world in which he sees cryptocurrency as a solution to the problem of uncontrolled spending of money, believing that blockchain technology can lead to a more fair and equitable distribution of financial resources.

Compared to cryptocurrencies, fiat is starting to seem less efficient. Cryptocurrency, despite its relative youth, is already showing strong development. It provides a new level of decentralization that is often lacking in the traditional financial system.

• “We fear that cryptocurrency could become an alternative to the global banking system. This is why the system was rebuilt 40 years ago to combat money laundering. And Bitcoin and its decentralized approach pose a threat, so we do not support such competition,” the SEC, represented by Gary Gensler, called cryptocurrency the main competitor of the US financial system.

Despite the volatility of cryptocurrency, it is worth recognizing that traditional assets, including stocks, are also subject to significant fluctuations. This year we have just witnessed strong fluctuations in government bonds, which previously seemed impossible.

Dotcom crisis – will cryptocurrency come to a bad end? 

Dotcoms actively used the Internet in their activities. In the late 1990s, during the dot-com boom, companies, including many startups, attracted a lot of attention from investors, seeking to harness the potential of the Internet for business development.

The history of the “dot-com bubble” – shares of technology companies traded at highs, and then everything collapsed

The companies grew rapidly amid expectations of huge profits. Many of them have not generated income for a long time. And when investors realized that many were overrated, there was a massive collapse in stock prices. 

• “In the late 1990s, when the Internet was just beginning to actively develop, most did not realize its potential and impact on the future. On television they discussed what the Internet is, and some even expressed sympathy for this new technology. Today, taking into account the development of the network, we understand that the Internet has truly turned the world upside down and created new business models, opening up many opportunities for entrepreneurship,” Vladimir Okhotnikov draws a parallel and says that we now underestimate cryptocurrency as well as the Internet in past.

It is still difficult to call cryptocurrency a full-fledged financial instrument at the level of, for example, gold. However, the dynamics of development and growth indicate that this asset cannot be ignored, especially if a person is thinking about diversifying his investment portfolio.

Bitcoin attracts the attention of investors due to its unique nature and potential to become an important element in the global financial system.

This is a historic moment when ordinary people, individuals, have the opportunity to participate in a new market along with institutional investors. Now you, like anyone else, can invest in interesting crypto startups. For example, in the traditional financial market you would never be allowed to buy Facebook shares before venture capital funds, or you would not get into some interesting project before it enters the market in the form of shares or bonds. 

Clearing, settlement and custody – Vladimir Okhotnikov names the three pillars of the economy

Clearing is how to know who owns something of value when an exchange of value occurs. When, for example, you transfer money for a stock or bond, clearing helps establish that the transaction took place and who now owns the security.

Custody is a safe and convenient place to store valuables. This can be a virtual storage for electronic assets or a physical one for paper assets.

The settlement carries out the calculation and informs that the asset has been transferred and the conditions have been met.

These three important services—owner identification, secure storage, and transfer—represent the financial world. Today, these services can be completely transferred to the blockchain, which opens up new prospects for doing business.

To clarify, let’s give an example: imagine you have a banknote, and if you show it, then others will know that you have it – this is called clearing, which helps to find out who owns the valuable document. And when you decide to keep this bill in a safe place, this is already regarded as storage. And if you transferred an asset to someone at the custody stage, then this is regarded as a settlement. 

• “The power of three instruments, which completely changes the perception of the entire financial market. Imagine being able to own valuable assets without exposure to counterparty risk. You can find out if someone has an asset without risking that they will or won’t give you a certificate from the bank, or whether they will open an account or not. And the most important thing is that only you can decide to whom and where to transfer assets,” Vladimir Okhotnikov says that in centralized structures everything is decided for you. However, with the advent of decentralization, no one will be able to influence your decision. 

Buy pickaxes instead of gold

Looking back we see that many financial instruments which are considered commonplace today were new decades ago.

Forms of option pricing emerged relatively recently, in the 1980s, and the innovation was even awarded a Nobel Prize. Likewise, credit default swaps were only invented in 2006 by J.P. Morgan after the Exxon oil spill.

Perhaps in the future someone will be awarded a Nobel Prize for developing methods for evaluating crypto projects, since this is a new and complex area that requires understanding, taking into account many factors.

Today, humanity is on the threshold of a new era – the era of cryptocurrencies and decentralized finance. We can be part of this breakthrough, with access to projects and investments that we could only dream of before. The ability to evaluate crypto projects as a new asset opens up inexhaustible potential. And this is not just an investment, it is a new look at the world of finance, where each of us can play an important role.