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Money in 2030: A future where DeFi and CBDCs can work together

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Money in 2030: A future where DeFi and CBDCs can work together

Decentralized finance (DeFi) is changing the way that people all over the world think about money faster than any previous financial revolution. Banks, which have monopolized the way we’ve accessed money since antiquity, are finally seeing their status being challenged. Now, it’s DeFi which is starting to provide an alternative that could turn the economic landscape on its head and democratize access to finance.

This seismic shift in power away from governments and banks and towards real people is long overdue, particularly in developing nations where DeFi is already emerging as a tool for remittances and small loans. Financial inclusion is another significant advantage that DeFi can deliver, particularly when 1.7 billion adults remain unbanked.

Related: The great unbanking: How DeFi is completing the job Bitcoin started

The growth of the DeFi space is staggering. By taking concepts from traditional finance and turning these into transparent protocols through smart contracts, DeFi provides a trustless ecosystem that delivers anything from insurance to loans to savings accounts. The appeal for DeFi is evident, with the total value of assets held in DeFi financial products nearly topping $175 billion.

Yet, with DeFi on the rise and governments and banks not wanting to lose control of the monetary system, they are turning their attention to issuing digital currencies themselves. Central bank digital currencies (CBDCs) are seen as a way of maintaining control over the monetary system while giving users faster and cheaper transactions. If we fast forward to the year 2030, what elements of decentralization can we expect to see in our everyday lives?

DeFi in the future

Imagine, if you will, that the year is 2030. Célia, a young Parisian woman, pulls out her phone to buy a Eurostar ticket from Paris to London. When she reaches the payment screen, she chooses her primary digital wallet. Switching over to her wallet, Célia sees that her digital euro balance has gone down. Nowadays, nobody holds cash savings, as loans can be taken out and paid back within a person’s wallet depending on the value of any assets they own and are paid back automatically over time.

Related: Tales from 2050: A look into a world built on NFTs

While DeFi is playing a primary role in 2030, so, too, are CBDCs, which have become the default tool for banks worldwide. China is leading the way in following the success of its previous trials. However, they lean toward greater state control, scrutiny and censorship. As a result, DeFi has become the primary way that individuals who value freedom choose to manage finances and now underpins the world financial system. And because of DeFi’s prominence, we’ve said goodbye to bank accounts, enabling us to access and use our money anywhere at any time and loans to be borrowed when required.

Cryptocurrency’s aim to make money universally available worldwide means that underlying DeFi protocols provide liquidity on swaps, borrowing and lending. And despite the complexity of DeFi, end users are not aware that they’re interacting with these global liquidity sources directly as complete privacy is ensured on all DeFi and spending.

On top of that, we transact all international payments on layer two zero-knowledge proof rollups (zk-Rollups), a scaling solution that bundles up hundreds of transactions off-chain into an Ethereum smart contract thus helping to reduce congestion on the blockchain. A cryptographic proof, known as a SNARK, is produced, ensuring the validity proof and is posted on layer one. Delivering free and open alternatives to government money, Bitcoin (BTC), Ether (ETH) and permissionless stablecoins are spent and swapped straightaway for any major government coins.

Defeating DeFi’s challenges

The way DeFi is going, this is certainly a plausible future for it. Ultimately, though, for DeFi to reach what many may consider a utopian future, some hurdles need to be overcome first.

One area to consider is the barriers to widespread adoption. For instance, the vulnerability of smart contracts, the unpredictability of the DeFi market, regulatory issues and accessibility to emerging technologies.

Other centers around the space being too complex for the average trader or investor. And blockchain inefficiency is a problem that needs to be addressed, particularly relating to energy consumption and the cost of transactions on Layer 1 protocols on the blockchain. While alternatives have so far compromised on security, early-stage technological solutions are coming to the fore. Examples of this include ZK-proof cryptography, or layer-two solutions, packing more transactions into the space, and therefore reducing cost.

Of course, some of DeFi’s challenges can’t be mentioned without talking about the naysayers. For instance, Dan Berkovitz, Commissioner of the Commodity Futures Trading Commission (CFTC), believes that DeFi is a “bad idea.” And Tom Mutton, the Bank of England’s fintech director, had said that any CBDC would be “ten times more efficient per transaction” than Bitcoin. Yet, one has to question if he realizes that zk-Rollups are already 1,000 times more efficient than Bitcoin?

What is DeFi doing to overcome these hurdles?

More education is needed. The DeFi Education Fund is an example of one organization attempting to educate policymakers on the benefits of the DeFi ecosystem and to help achieve a regulatory framework for it. In a bid to boost knowledge of DeFi, it’s funding applicants working on DeFi research and advocacy in legal research and DeFi practices, among other things. With an increased understanding of DeFi, mainstream adoption will be easier as new users are onboarded.

Related: Mass adoption of blockchain tech is possible, and education is the key

Another means of expanding the number of users is by improving the user’s experience. This is already seen with layer-two protocols, which are building wallets and infrastructure that support DeFi. And by doing so, they remove friction and cost and deliver better ways for users to recover lost keys while making the space less complex.

Long-term, though, regulatory clarity is something that will give confidence to traditional investment service providers such as banks and institutions while creating a pathway for allowing users to access DeFi on their terms within existing apps. What’s great about this is that many customers won’t even know they are interacting with a blockchain behind the scenes as all the complex wallet interactions will be hidden. It is this collaboration between traditional finance and decentralized finance that could give DeFi the push it needs to broaden further into the mainstream.

Related: DeFi: Who, what and how to regulate in a borderless, code-governed world?

Taking action now

It’s clear that DeFi is here to stay and could become the core of finance in 2030. For that to happen though, more needs to be done today.

Right now, it’s the growing development of CBDCs that pose both a threat and an opportunity to DeFi as more nations experiment with them and governments begin to adopt them. But, just because CBDCs are gaining pace, that doesn’t mean DeFi can’t find its place in our future world too.

Yet, if people want to control their own money and know where it’s coming from while giving developing nations access to banking, then DeFi is where the future is heading. The core elements of DeFi infrastructure, such as decentralized exchanges (DEXs), borrowing and lending protocols, exchange aggregators that automatically find the best prices and cross-chain bridges, will also be needed by CBDCs in the future if these government currencies want to be able to interoperate with each other and be used as fully digital money.

DeFi is therefore playing a role as an innovation laboratory, allowing different infrastructure issues to get tested at a break-neck pace and ensuring that the correct infrastructure required by CBDCs will already be available when they are being rolled out around the world. CBDCs that adapt to make use of the rapid innovation in public blockchains and DeFi will benefit through connection to massive liquidity pools, allowing users, for example, to instantly swap between digital euro and Ethereum, or to use DeFi infrastructure to earn a yield on the digital pound.

Related: Understanding the systemic shift from digitization to tokenization of financial services

It’s the CBDCs that are purposely disconnected from DeFi that will lose out to private stablecoins — one of the fastest-growing sections of the crypto industry. But, we do not need to rush to make this a contemporary reality. There are plenty of hurdles that DeFi needs to overcome before we see the kind of mainstream adoption that becomes present in everyday life.

By 2030, our Parisian friend Célia may not know or care what part of her transactions are CBDC and DeFi, and it shouldn’t matter to her. There is still lots of work to be done to make that a reality. We hope that by 2030, Célia will be just one of the hundreds of millions of individuals who are enjoying the bright uplands of a decentralized financial world, one that will have forever changed the way we view money.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Will Harborne is a co-founder and CEO of DeversiFi, a layer-two DeFi trading platform powered by StarkWare’s scalable technology. Will has worked on technology consulting projects, first at Cambridge Consultants and then at IBM, before transitioning into work full-time in the public blockchain space and joining Bitfinex in 2017. There, he led several projects before combining his experience with his passion for Ethereum’s ecosystem of permissionless innovation to help spin out Ethfinex. Will is a member of the Melon Technical Council — one of the first major governance experiments for a blockchain-based protocol. He also holds a Masters of Engineering from the University of Cambridge.

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PlanB Admits $98,000 November Bitcoin Price Target ‘First Miss’

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PlanB Admits $98,000 November Bitcoin Price Target ‘First Miss’

Some investors reacted angrily after PlanB admitted that his model failed to accurately predict the price of bitcoin (BTC) for November.

The popular crypto analyst aimed for a $98,000 BTC price for the end of this month. Just last week, he insisted the price target was still possible, even as markets declined.

PlanB correctly predicted BTC reaching $47,000 in August and $43,000 in September. He slightly missed the $63,000 target for October, but said the three percent “rounding error was close enough for me.”

Now the pseudonymous Dutch investor says that his $98,000 prediction for this month “will probably be a first miss,” according to a tweet posted on Nov 25. He did not give an exact reason for the failure.

“I see this miss as an outlier, a black swan, that has not occured in the data last 10 years,” he explained.

He spoke as the price of bitcoin tanked to $55,300 on Nov 23, down 20% from its record high of $69,000 reached on Nov 10. Some analysts are blaming the decline on fears of the impending Mt. Gox BTC repayments.

Bitcoin ‘stock-to-flow model still on track to $100,000’

PlanB, who claims 25 years of financial markets experience, is famed for creating the stock-to-flow (S2F) price prediction model. The model is based on the ratio of the current supply (stock) of an asset or commodity to its annual production (flow).

It can be applied to any asset with limited supply really, and the Dutch analyst did so with bitcoin in 2019. The idea is that since the bitcoin supply diminishes with every “halving” event every four years, it will create boom and bust cycles. He then uses these cycles to forecast prices.

PlanB explained that the missed November target relates only to the “floor model,” one of his three price prediction tools. Unlike the S2F, the so-called floor model relies on price and on-chain data, he says.

He insisted the stock-to-flow model had not been “affected and indeed [was] on track towards $100,000.”

Justin Stagner put the miss into perspective. “[It is] not like you just barely missed it either. I mean, its looking like you really blew this one,” he stated.

Mounting criticism

Some investors reacted angrily to PlanB’s admission of failure, blaming the crypto analyst for their financial losses.

“I used my student loans along with a short term loan using my house as collateral to go all in at $68k because you told me it would reach $98k. Now I’ll be homeless and without a degree…” complained Twitter user Brett Lethbridge.

Another lamented: “Now your stock-to-flow model is not reliable anymore. Most people incurred great losses because of your prediction.”

However, several other people replying defended PlanB, and even thanked him for his predictions. Often, they defaulted to a familiar refrain, a disclaimer of sorts, that his forecasts are “not financial advice. Do your own research.”

PlanB himself averred:

It is indeed absurd that when you publish information for free, somehow people make you responsible for their investment decisions and actions. Everybody is responsible for their own (investment) decisions and actions. Blaming others is a sign of immaturity: NGMI (not going to make it).

The Dutch analyst has faced criticism before. He’s often accused of adjusting his price predictions lower once it becomes clear that the S2F would miss its target, and be invalidated.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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Bitcoin (BTC) Falls Below $56,000 After Failure to Sustain Rebound Rally

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Bitcoin (BTC) Falls Below $56,000 After Failure to Sustain Rebound Rally

After initiating a bounce on Nov 25, Bitcoin (BTC) decreased considerably the next day and is back at its weekly lows.

Since Nov 19, BTC had been hovering above the $56,500 support. This is both a horizontal support area and the 0.382 Fib retracement support level.

Yesterday, technical indicators started to show some bullish signs.

After 15 successive lower momentum bars, the MACD finally created one higher (green icon). This was a sign that the short-term trend is gradually picking steam. 

Furthermore, the RSI generated a bullish divergence (green line). This is a bullish occurrence in which a price decrease is not accompanied by the same increase in selling momentum.

However, BTC reversed its trend on Nov 26 and is in the process of creating a bearish engulfing candlestick (red icon). This is a type of bearish candlestick in which the entire previous day’s increase is negated the next day. There are still more than 15 hours until the daily close, but the start of the day looks extremely bearish.

If a breakdown were to occur, the next support area would be found at $53,250.

Short-term BTC movement

The six-hour chart shows that BTC has been decreasing under a descending resistance line since Nov 19. This is a sign that BTC is correcting.

Furthermore, BTC created a lower high relative to the price on Nov 20. This is considered a bearish sign since it didn’t have enough strength to reach its previous highs.

The even shorter-term two-hour chart shows that BTC is trading inside a symmetrical triangle and is very close to its support line, which coincides with the $56,500 horizontal support area. 

Therefore, a breakdown from it would likely accelerate the drop.

Wave count

The wave count suggests that BTC is in the C wave (red) of an A-B-C corrective structure. This means that after the correction is complete, the upward movement is expected to resume. 

The sub-wave count is shown in pink. It shows that BTC is in wave five of the correction, which is the final phase. 

There is a considerable Fib confluence between $53,250-$53,800, created by: 

  • Length of sub-wave one (pink)
  • External retracement of sub-wave four (white)
  • Length of wave A (red)

These levels also coincide with the long-term Fib support outlined in the first section. Therefore, BTC is expected to reach a low in this area before reversing.

For BeInCrypto’s previous Bitcoin (BTC) analysis, click here.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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South Korea Crypto P2P Trading Hits New Highs as Regulators Debate Taxation

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South Korea Crypto P2P Trading Hits New Highs as Regulators Debate Taxation

P2P crypto trading has hit a new all-time high in South Korea, data from LocalBitcoins shows. The jump in P2P trading comes at a time when there is a lot of uncertainty surrounding regulation in the country.

Peer-to-peer trading of cryptocurrencies in South Korea is hitting all-time highs as regulators offer some ambivalent comments on regulation. Data from LocalBitcoins shows that over 353 million in Korean Won was traded in the first week of November. This is a significant jump from previous weekly volumes.

South Korean P2P trading volume: Coin Dance

Pondering crypto tax

The increased interest in P2P trading comes as regulators are working on implementing a regulatory framework. South Korea, already one of the leading governments when it comes to cryptocurrency market regulation, is doubling down on its bid to prevent any illicit activity.

The high P2P volume may be a result of investors seeking to make the most of their capital as regulators bear down. Recent reports have indicated that there is some confusion among investors because of the lack of clarity surrounding regulation.

One of the primary issues is the implementation of crypto taxation. South Korea officials announced that it would tax the asset class, to the tune of 20%.

But lately, reports have suggested that there could be a change or complete repeal to this taxation scheme. The taxation law will come into effect in 2022, though it remains unclear about what specific form it will take.

NFT regulation is also throwing more confusion into the mix, as the Financial Services Commission (FSC) said in early November that it would not subject the special asset to taxation. However, later, the Vice Chairman of the organization said that tax provisions would be made for NFTs.

Uncertainty still looms

At the moment, it’s uncertain exactly what the regulatory landscape in South Korea will look like, given the lack of conclusion so far. The South Korean opposition party challenged the taxation scheme and pushed for a delay to 2023, demanding a more generous tax plan.

Exchanges are one of the major elements of the industry under the microscope, with 2021 seeing the first regulatory compliance certifications being sent to them. Several exchanges have had to shut down following regulatory scrutiny.

As it stands, it’s unclear what the specifics of crypto regulation will be. However, it’s almost certain that there will be a framework implemented, and whether or not it is stricter than investors like remains to be seen.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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