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After the drama punctuated by the 2022 downturn (or vice versa?), many of us grass-half types have taken the opportunity to focus less on market dynamics and more on the implications of cryptocurrency’s continued development. Welcome. Technology can take over the world. And it can potentially have a sizable impact, nothing less than spreading economic opportunity and personal empowerment while rewiring finances and culture.
Noelle Acheson is the former Head of Research at CoinDesk and Genesis Trading.This article is an excerpt from her Ciphers are now macros This newsletter focuses on the overlap between the changing cryptocurrency and macro landscapes. These opinions are hers and nothing she writes should be construed as investment advice.
When we talk about focusing on technology, we generally mean how information is stored and distributed over networks with varying degrees of decentralization. This will power new forms of engagement and economic activity. What is still often overlooked is the potential of cryptography to support innovation in other areas of development. The impact will be felt far beyond blockchain, finance and culture.
The root of this influence is in the crypto market. This may sound surprising given the devastating losses, bad actors, painful exploits, and regulatory crackdowns that have characterized the market in recent months. And given the “institutionalization” of market experimentation, it may seem contrived given that banks and public institutions are testing familiar forms of issuance with new types of payments.
To pull this thread a little further, we have to go back in time.
Newcomers to the manic world of cryptocurrency markets may not be aware of its origins. The first peer-to-peer crypto transactions were essentially online bulletin boards. It needed to be low cost, easy to spin up, and highly reliable. These evolved as demand grew, but the early iterations were still rudimentary, uncoordinated, and building it up as they went along. Then it started to become more sophisticated, especially when it became of interest to professional investors, and today we have services, structures and best practices designed to support a significant flow of money throughout the system. are intricately combined.
However, it is not as complicated as traditional exchanges. Partly due to simplified settlement and storage. One reason for this is that while the tendrils now extend into traditional finance, crypto platforms operate mostly in niches that regulators have not yet surrounded with many rules. Moreover, it can be easily spun up in different configurations such as centralized order books, decentralized liquidity pools or new structures yet to be tested. Its relative flexibility not enjoyed by traditional exchanges is one of the superpowers of the crypto ecosystem.
It poses risks. The often lamentable lack of transparency of platform operators, lack of regulatory protections, hacks and code errors come to mind. But as familiarity increases, technical solutions improve, interfaces evolve, and regulators pay more attention, many of these can be mitigated. Innovation is about focusing on possibilities while implementing safeguards. This is where the flexible structure of the cryptocurrency market comes into play.
It is now well known that blockchain-based protocols and applications can raise funds by creating tokens and distributing them to users and investors. An “initial coin offering” (ICO) sparked his 2017 hype bubble, and the ensuing shakeout taught a tough lesson. Since then, however, tokens have often worked in tandem with equities to initiate or fuel economic activity in new layer-1 blockchains, decentralized applications, and creative initiatives.
Blockchain-Based Funding for Blockchain-Based Projects: We understand it. is a potential possibility that should be supported. Moreover, given the flexibility of the cryptocurrency market structure, it can be done almost anywhere.
Imagine this:
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Luanda’s regional bank tokenizes tranches of loans to startups, aiming to bring digital efficiency to Angola’s ports and reduce lender risk by adding liquidity and lowering funding costs has been set.
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The Addis Ababa incubator is working with Ethiopia’s Ministry of Innovation and Innovation to develop an exchange for trading stock-like tokens issued by existing start-ups with ideas ranging from vertical farms to satellite launch sites. I’m here.
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A venture fund in Accra is working with the Ghana Stock Exchange to launch a crypto platform that facilitates ICO-style token-based funding, but requires formal oversight and full disclosure, and will be outsourced from telemedicine. Help your project to eLearning get off the ground and find a market. .
Politicians in developing countries emphasize the importance of technology to economic growth, but few actually implement policies that move the financing needle. Outside of regular locations, funding tends to be small as capital pools are not as rich as in developed countries and geographic and network restrictions often limit the size of the demographics covered. I have. However, this need not necessarily be the case. A more liquid, transparent and innovative market could boost regional development, especially if cross-border investment is allowed, and could lead to global technology initiatives. .
Clearly, a digital ledger platform is not essential for this kind of fundraising. So far, startups are closing rounds, banks are lending, and grants are being collected without them. However, the transparency and immutability of public blockchains can give lenders, investors, and startups additional assurances, ultimately increasing interest from a wider audience. It is also easier to spin up than traditional exchanges, reducing time-to-market and costs.
Now, I’m neither a trading systems engineer nor a blockchain developer, so there are probably some parts of this framework that I’m doing wrong, but the rails that assets travel on already exist, and designing an onramp shouldn’t be too difficult. just like it was a few years ago. Platforms emerge that essentially provide a plug-and-play backend for exchanges, and the ecosystem evolves to build the stack of services you need (wallets, custody, Know-Your-Customer, staking, tax) It allowed for a certain degree of modularity in doing so. accounting, etc. I think the complicated part is the connectivity to banks and payment services, but the increased use of stablecoins could provide a temporary gap while the market adjusts.
Who is the regulator? Clearly they want to have a say in user protection, money flows, foreign influence, etc. And anything new means risk, and regulators don’t like it. But improving local technology funding channels that can boost jobs, tax revenue, local standing, and provide transparency in asset allocation The thing is not that hard to sell, especially as governments change and are increasingly influenced by younger voters eager for opportunities. Work on progress. There is also pressure from local institutions hungry for a wide range of assets to build their portfolios, and excitement from retail investors who do not live in a more developed financial system with more stable currencies and more readily available savings instruments. There may also be
This is probably naive as it is hard to change. But change is happening anyway, not just in local demographics, economic priorities, and political sentiment. We are witnessing a reshaping of spheres of dependence as new tools for self-reliance expand resilience and reach. An example of fundraising and engagement farming set up in a region with a sophisticated financial system is sure to be noticed in regions looking for new status.
They are also encouraged by bright minds outside the typical hub that are driving progress on projects that may ultimately contribute to human development. It’s more than easy to spin up, buy and transfer. It is to promote economic activity in all sectors. In short, it is a superpower with potential influence far beyond its original mandate.
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