Cryptomillionaire Sam Bankman-Fried outlines 3 practical applications of cryptocurrencies and blockchain technology in the real world
In the midst of the so-called “cryptocurrency winter”, investors are reassessing whether cryptocurrencies can actually be considered a good asset store or a useful hedge against inflation.
Cryptocurrencies have been spiraling in recent months, throwing $ 2 trillion in value over the past year amid a major market downturn, leaving the finances of thousands of cryptocurrencies stranded on frozen accounts.
The downturn has caused many amateur investors to turn their backs on virtual currencies. But while cryptocurrencies may not be as uncorrelated and disconnected from larger market forces as once thought, that does not mean they have any use value at all, according to Sam Bankman-Fried, CEO of FTX, one of the world’s largest cryptocurrencies. .
He argues The crypto and blockchain system they operate on can offer users clear benefits in three key areas: virtual payment systems, investments and online social media platforms.
Virtual payments
Bankman-Fried pointed out that traditional virtual payment systems involving cash or credit cards can be either time consuming or inefficient, due to delays in transfers to recipients and additional fees charged by banks.
This can lead to time spent without available funds or even money getting “stuck in the middle and waiting for you to save them somehow,” Bankman-Fried said. But with cryptocurrencies, he counters, these processes are significantly reduced and simplified.
To illustrate his point, Bankman-Fried created two virtual cryptocurrency wallets and initiated a transfer between them, which took about 15 seconds to complete at a transaction fee.
Less risky investments
Another way Bankman-Fried views crypto as a superior traditional money and financial tool is to make investments, especially to ensure that they are not obliterated due to delays regarding stockbrokers and financial intermediaries.
Bankman-Fried referred to last year’s stock rally at video game retailer Gamestop as well as several other companies, which became known as “meme stocks”. As value rose for companies such as Gamestop, traders were on more than one occasion shut out of the market, unable to buy or sell shares.
Bankman-Fried wrote that traders were banned due to increasing “settlement risk”, the possibility that one or more parties involved in a transaction or a loan agreement do not meet the terms of the contract.
Traditional markets normally require going through several banks, stockbrokers and other intermediaries to make an investment. Settlement risk and the potential for something to go wrong can exist at any time during this process, and Bankman-Fried says that cryptocurrencies are ideally equipped to avoid this scenario.
Social Media
The last area where Bankman-Fried says that the structure behind cryptocurrencies tops traditional systems is in social media and online communication.
He wrote that the current online communication is “break“spread across a variety of different apps owned and managed by a small group of” pseudo-monopolies. “
But if you use a social media platform based on blockchain, Bankman-Fried says, messages from different platforms can be instantly retrievable on a public chain. New platforms can also easily join the chain at any time, something Bankman-Fried sier would lead to greater “diversity of opinions” and “real competition”.
The catch
While Bankman-Fried says that these applications of cryptocurrency and blockchain can technically already be a magnet for traditional financial tools, they are far from popularized yet.
“How many of these sites have crypto revolutionized so far? I think the answer is ‘not really any of them.’ It’s starting to affect someone, but not in a widespread way yet, “he said wrote.
Many of these applications still require additional regulatory clarity, better technology and wider use of multi-user cryptocurrencies, Bankman-Fried said.
But attracting more users will probably be difficult as long as the crypto winter rages.
The number of active cryptocurrencies shrank by around 50% between November 2021 and May last year, according to a recent estimate by Bank of America analysts, who also found that cryptocurrencies now make up less than one percent of financial assets in US households, which means that cryptocurrencies still have a lot of ground to catch up before Bankman-Peace’s vision can be realized.
This story was originally featured on Fortune.com
