Reformatting the Financial Structure through Blockchain

Reformatting the Financial Structure through Blockchain

By AmineU | AmineU_GP | 19 Sep 2021

Time to strip away entitlement.

It’s been awhile and before I begin, let me say this is not financial or expert advice, but an observation that a few may already share and merely an opinion from an average citizen. 

I heard quote recently and I cannot recall where, but it is relevant for this article, and I will reference it later. “Mother Nature distributes power equally”

At the beginning, the financial system was meant help generate cash flow, provide securities, and savings not only for governments and businesses but for the general population. An example, the financial system helped businesses support ‘lay away’ options they provided for their customers. If you are unfamiliar with what lay-away is/was it was a means for a customer to pay a fixed amount for a fixed timeframe towards an item, that they did not immediately have the funds for. Often at no additional costs. A novel idea. It required a deposit and an agreed transfer of ownership once the final payment was made. As you can imagine, it wasn’t a perfect system, and had its share of less than scrupulous behavior. However, what it did provide was a means for an individual to purchase a product with no additional burden, forcing the process of money management.The financial structure also helped families buy a new home or car.

As time moved on came the invention of credit. The new hot item. Why wait when you can get a product of your desire right now with just a low interest on your balance and no rush to pay it off? This has been the case for decades since. If you have been paying any attention to market news, you know the debt levels are through the roof as with the higher interest rates.

But that’s not the worst of it. How did we determine who gets credit and how much? Back then it was simple, a Bank Manager knew you or your family and with a handshake and signature the credit was yours. It was also simpler time. Of course, there are other lingering issues within the financial structure such as historical regulatory abuses, mistreatment of marginalized populations, systematic racism, and sexism that still exists.

So, what is the method to rate financial value of a person? FICO (a measure of consumer credit risk), if you have credit or need credit you must be scored. Based on analytics software of various and unknown inputs FICO will provide a value that aids a Loan Representative in determining if you are credit worthy. It’s meant to be unbiased and not discriminate but as this topic is about the need to move towards Blockchain, the chances of biased views are high. It resulted in more have nots, and even fewer haves.

Let me demonstrate the issue for many blockchain/cryptocurrency skeptics or new entries. Records have shown that the discussion regarding digital currency existed years before Satoshi Nakamoto

solidified the idea by creating Bitcoin. Late 60-70s the disparity between working class and affluent was rarely ever past 200%. You could work at a job for years, pay your bills and have decent savings with possibility of receiving a pension. This was general outcome for most of the working class. Then came the impact of recession after recession after recession etc. Primarily due to mismanagement and excessive greed, by banks, businesses, and governments as well as other factors. The disparity gap grew. Wages to match living expenses halted and the cost living has risen and continues to rise.

More and more people are unbanked or cannot afford to be banked. The banks became custodians of the process of peoples’ money. They dedicate what minimums, the charges, interest, credit etc. Often unabated by the government, businesses or even us.

As long as, a person met their ‘standards’ of earnings, deposited money into their system, they could/may receive a reward (annual interest rate) and may get themselves a leg up as they struggle to build their net worth. But it all must work under current Bank structure.

What about the many who do not fall in the cookie cutter category? The service workers, the seasonal workers, students, precarious work conditions etc. or anyone. For the billions who earn less than 35K annually, where’s the tools to help them advance?

I’ve read too many articles that point to how much the regulatory bodies continue to get it all wrong. Too much self-interest, too much looking to maintain control.

Currently as the development Web 3.0 continues, here is a prime example of why blockchain/cryptocurrency is a must. If someone is earning less the required amount needed to survive in their region it is likely (not certainty), that person is living pay check to pay check making it a challenge to generate any savings. Imagine after receiving their pay check to be told they can only have access to %, and that they must wait an additional 3-5 business days before they have full access to their funds.

I know this has to do with assuring the funds have ‘cleared’, therefore confirming the funds are in the issuer’s account. But remember they already ‘earned’ the revenue and then imposed a delay to utilize it. One can see dilemma if/when rent or a payment is due. It used to take even longer, but years ago a person earned more as the dollar had more buying power. Only people with high minimum balances, ‘steady’ stream of revenue can bypass this delay. Therefore, subjecting a ‘non-conformed’ person to more hardship/stress.

With blockchain this example is a non-issue. Because both accounts are verified and undeniable. If depending on smart contract design, an employer’s funds are in some sort of trust wallet, employees issued a key (just an example) can receive their earnings within minutes. The ‘clearing’ has already been established.

Let’s look at other opportunities. If someone is looking for a loan, algorithms are created to determine what they can or cannot receive and their level of risk. The algorithm makes the final analysis not a third party. Saving/growth/investments tools and opportunities that can boost personal economic well-being vs current static models. Just to be clear, I believe there should have some oversight and that’s where governments can lead.

Guidelines, and all-around beneficial regulatory designs are needed but they must be helpful for the new economic model not harmful.Government/Banks/Lobbyist with the mindset of ‘better to ask for permission than forgiveness’’ are approaching the process with the wrong attitude.

It will be interesting to see which country(ies) takes the lead on this challenge with attitude in line from perspective of asking the people for forgiveness and look for assistance. An improved approach from a government body would be ‘We are late to the game, we messed up in the past, can (blockchain leaders, diversified financial experts, even average citizen) assist us in getting this right?’

Remember the quote from the top. Mother Nature distributes power equally? Blockchain/Cryptocurrency is the same. Anyone willing to understand its’ potential like ‘education’.  Your efforts can provide financial benefits not seen in over 30 years. Because at the root (excluding human coding biases) blockchain removes human fallibility.

Jens Galschiøt -Survival of the Fattest

The famous sculpture by Jens Galschiøt -Survival of the Fattest, has an inscription:"I'm sitting on the back of a man, I'm sinking under the burden, I would do anything to help him. Except stepping down from his back."

--Maybe it is time that the old financial model steps down to make way for a new beginning.

I believe in blockchain and cryptocurrencies. It's still very new with many needed modifications before it becomes fluid or as easy like the internet we use today. But I am confident, society as a whole will some come to realize it's superb power. The normalcy of Blockchain will not happen overnight, but it will happen.

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