DeFi Must Avoid Repeating the Wealth Gap Found in Traditional Finance

6 mins
14 October 2021, 14:00 GMT+0000
Updated by Leila Stein
14 October 2021, 14:00 GMT+0000
In Brief
  • Decentralized Finance (DeFi) promises to remove gatekeeprs and middlemen.
  • Currently, the promising world of crypto, is still mimicking the traditional finance inequalities.
  • Proper marketing and education will help bring DeFi into the mainstream.
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Decentralized Finance (DeFi) is providing promises to improve upon traditional finance. However, the complexity is still a barrier to entry for many.

To this day, people approach savings by putting money away in a savings account. Some even hide theirs under the bed or in the garden. For many, the stock market represents a portion of their savings, but they still have a large amount in cash.

Despite governments choosing to print and subsequently inflate money, individuals have, until now, been unable to experiment.

Thus, we find ourselves using decade-old systems that simply don’t work as we need. This is due to centralization, low global financial literacy, high intermediary costs and slow transactions, a general lack of trust in governments and banking institutions, rising global inequality, currency manipulation, and financial censorship, and the build-up of systemic risk.

As a result, the general confidence in, and understanding of, how money works has worsened over time. Historically poor decisions enacted by government interventions have resulted in 31% of the world’s adult population remaining unbanked, a gap in financial literacy and wealth levels between the rich and the poor. 

So wherein lies the problem exactly? The problem with money is that control is held by intermediaries. These middlemen haven’t always made the right decisions for the people. They may not even have the tools needed to correct unforeseen issues that arise from those issues.

Financial innovations have never been allowed to develop any further. Governments worldwide actively preventing introducing new instruments, technologies, institutions, and markets. 

However, over the last decade, we have finally seen the introduction of an unstoppable technology – decentralized finance. DeFi has removed the monopolizing control of finance away from questionable intermediaries. This ecosystem is paving the way for the rise of cryptocurrencies.

A promise to change wealth generation

Cryptocurrency adoption, from a national level, is already happening. It is no surprise that residents in countries such as Turkey, where inflation is up 40%, flock to access cryptocurrencies such as bitcoin rather than the legal tender, the Lira. 

In El Salvador, we’ve just seen the government seek cryptocurrency as a more reliable form of finance. They chose this instead of their inflating currency via the legalization of bitcoin. Even in the United States, more than 1 in 10 Americans traded cryptocurrency in 2021.

Cryptocurrencies are the people’s money. They are made by the people and traded by the people.

Traditional finance in the context of wealth generation and investing is more often than not limited to those born into wealth, alongside those privileged enough to have access to enough financial education and literacy. Therefore enabling them to be strategic with their earnings and savings. The wealthy are born into an environment that understands how to put money to work instead of working for money. 

This simply isn’t the case for most people, nor is it attainable in the current financial structure. People continue to live day by day, dollar by dollar.

Crypto is changing the game by democratizing access to varying financial tools to anyone with internet access. People can buy crypto and invest at any time of the day or night without relying on traditional intermediaries. 

Reaching a platuea

Crypto holds great potential. However, it has plateaued in the trough of disillusionment. It frustratingly continues to mirror the wealth gap we already experience in traditional finance (TradFi). 

The strategic tools that bring in the most significant profits are usually limited to those who can afford to pay higher fees or can reach the minimum barrier of entry. 

Ultra-wealthy crypto holders have the means to pay investment funds and brokers. These experts have access to traditional-backed investment tools.

Thus providing trading, custody, and financing services to ensure their investments are correctly balanced against the market at all times. 

We have been told to save our dollars for years while the government continues to print more money, devaluing every cent we have saved.

The ultra-wealthy are storing bitcoin like gold bars. Meanwhile, it becomes more expensive and inaccessible for people who genuinely need access to decentralized currencies in countries worldwide. These include Ukraine, Afghanistan, Turkey, and Brazil, where governments are unreliable and do not protect or even hold wealth.

We shouldn’t be limiting access to the ultra-wealthy and making this social impact movement available to everyone with access to the internet. We need to level the playing field and be talking to the right people to enable all individuals to benefit from the wealth generation opportunities available in crypto. 

Enabling social impact

The reputation of cryptocurrencies is continually undermined in the mainstream media. Many view it as an industry full of hackers, scammers, and gamblers.

In reality, crypto is a burgeoning movement accelerating the most significant social impact change of our lifetimes. We need to ensure that Defi isn’t only in the niche corners of the internet, in Discord channels and Telegram chats. The crypto space urgently needs a makeover.

Social movements create change when they are easy to understand and speak to the right people. Social movement campaigns defend the very people who are seeking greater equality or acceptance in a community. 

Since the rise in popularity of the internet and online gaming, society has mocked and ridiculed the very “nerds” that develop the software now for our iPhones, smart TVs, contactless payment options, and of course, crypto. 

Right now, many consider crypto a Ponzi scheme. One that is full of scammers looking to get-quick-rich. We need to defend the developers, the innovators, and the gamers who are the nucleus of this social movement.

Including everyone in the DeFi wave

Marketing campaigns to generate and accelerate social movements are all about finding the nucleus of defenders who will support what you support. To expedite this social change, we must ensure that the way we market products and tools is not limited to those who are already fluent in complex coded trading strategies. Rather also those who are all looking to access new forms of finance.  

An example I have is from outside of crypto. We worked for three years on Dove’s Real Beauty campaign to extensively research a major issue from women’s point of view, especially mothers. We investigated their lack of confidence and how they felt like they didn’t fit into the unrealistic beauty standards forced upon them from Hollywood and photoshopped models. 

To create a cultural shift, we spoke to moms, and we defended them. We reminded them that standard beauty is not a photoshopped model. We reminded them of natural beauty, and Dove then became synonymous with what real beauty means.

To build a movement, you need to address the hardcore supporters and community backing that project from the ground up.

Take Airbnb as another example. During a campaign, we put the focus on the idea that everywhere could feel like home. Airbnb became a voice to the hedonists in us, who love to travel and free themselves from the constraints of the 9-5 slog by integrating themselves into wherever people were traveling. 

Airbnb and beauty products don’t exist in the same realm as cryptocurrencies. However, as leaders in this space, we must simplify and make relatable this complex Defi space.

This will ensure that all participants can access the strategic trading tools available to a select few, as previously mentioned.

Brave new world of DeFi

Crypto is on the brink of mass adoption. Still, so far, the benefits and rewards are being reaped by those who already have substantial wealth and deep technical expertise. This enables them to maximize their trading strategies and perform various types of analysis to profit or be gamblers who simply take a risk and get lucky.

Instead, newcomers who are finally jumping into this more democratized form of finance are suffering from the dangers of volatility in this space. They have to educate themselves on the complex nuances enabling them to develop risk-averse and profitable strategies.

We need to level the playing field and better market complex concepts to help drive greater financial freedom and social impact. Cryptocurrency is mature enough now that we can make it much more secure and make products well.

It isn’t fair that the middle to the lower-income class of the world see the purchasing power of their bank accounts decline. Fiat’s unintended fatal flaw is that it transfers the wealth of the working class to the wealthy. Thereby creating an even more significant wealth gap. Crypto can solve this, but it’s not doing it yet.

We need to be more precise about who we are trying to talk to. It’s time to develop more strategic forms of communicating, messaging, providing solutions and tools.

These need to be inclusive of people beyond those with exclusive skill sets to access advanced trading functions. This burgeoning crypto movement will increase broader usability, accessibility, and mass adoption for all players.


The information provided in independent research represents the author’s view and does not constitute investment, trading, or financial advice. BeInCrypto doesn’t recommend buying, selling, trading, holding, or investing in any cryptocurrencies