Private finance emerges as crypto’s next major growth catalyst

Long gone are the days of cryptocurrencies as an obscure center of experimental projects in the crypto space. 2020 has been a defining year for the space, as cryptocurrencies have taken major steps into the mainstream as governments, supranational organizations and corporate entities alike made significant entries in an industry they collectively call the “digital asset space”.

According to the choice of central authorities, crypto and its primary feature, privacy, have been excluded from the front and center roles they previously played as major attractions for cryptocurrencies. In their place, a wide range of DeFi applications that are more attractive than ever before has shed light on the background of improved liquidity, yield growing and unprecedented economic models.

DeFi is a game changer

In the opening quarter of 2021, trend lines have advanced further. The DeFi umbrella has convincingly expanded into the cryptocurrency scene, attracting investors and enthusiasts whose preferences speak for themselves: Two-digit APRs and a seamless user experience from DeFi are more enticing than the nuanced systemic benefits offered by a privacy-focused exchange.

Who can blame the users – As long as the benefits of DeFi remain incompatible with the privilege of personal privacy, the former will continue to grow at the expense of the latter. It is no longer a widespread lack of awareness that hinders a public interest in privacy, but rather a growing stream of trade-offs that individuals must concede in order to retain it. For privacy to become an essential feature of future exchange systems, it must be freed from the burden of mutual exclusivity; Only then can it take the form of a universally adaptable feature – an almost inexpensive accessory of sorts.

Private financing is coming

It is this imperative that gave rise to the organic emergence of the newest sector in blockchain technology – one that has the potential to disrupt the nascent crypto industry already famous for its disruptive potential. When it arrives under the “PriFi” title, the rising private financial campaign brings privacy back on stage by bringing it back into the chain – that is, in the Ethereum and Polkadot ecosystems – to integrate privacy into a robust network of sophisticated applications for decentralized finance.

Until now, privacy solutions have remained isolated from the stand-alone, privacy-oriented blockchains, albeit from the ever-increasing features of the DeFi scene. Consequently, the private financing movement has less ambition to provide users with access to privacy per se but to do without trade-offs, limits and restrictions – and its advocacy cannot come at a more dangerous moment.

GameStop is the catalyst

Since the historic formation of cryptocurrencies in the aftermath of the 2008 financial crisis, the world’s retail investors have unified no more firmly than market behavior in late January that NBC called the “GameStop mania.” When a number of high-profile hedge funds were seized with excessive leverage in short positions, retail investors gathered en masse in an online Reddit community called r / Wallstreetbets in order to raise the price of the assets underlying the funds’ short positions – most notably among them GameStop and AMC stocks.

Related: r / Wallstreetbets vs. Wall Street: An introduction for DeFi to make it onto the scene?

After a series of short pressures in which highly leveraged funds were forced to pay billions to cover their short positions, central companies, such as Robinhood, Charles Schwab, TD Ameritrade, and others, have significantly restricted trading activity in higher stocks, thus protecting the remaining capital of the exposed funds. . Shocked, angry, and virtually let dry retailers could only speculate about the background briefings and deal-making that preceded the coordinated authoritarian market controls.

But as with all obsessions, financial and otherwise, loss and grievances provide opportunities to learn and adapt. For retailers in 2021, this has meant waking up to a pair of realism: that central markets remain free only as long as they serve central powers and that monitoring is a primary supportive feature used by these power structures.

Related: Keeping feeling is the only way to enable blockchain adoption

In light of the trading restrictions imposed on GameStop and AMC, among other things, a new wave of mobilization of retail investors is now heading to the cryptocurrency space to make its next move. But this time, it’s not about the cryptocurrency’s original digital assets, but rather a new set of emerging derivatives: fully private synthetic assets on the chain whose values ​​are securely tied to traditional financial instruments – stocks, commodities, bonds, insurance products and more.

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

Opinions, ideas and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Alex Shipp He is a professional writer and digital asset strategist with a background in traditional finance and economics, as well as emerging areas of decentralized system engineering, token science, blockchain and digital assets. Alex has been professionally involved in the digital assets field since 2017 and currently works as an Offshift Strategist, Writer, Editor and Strategist for the Elastos Foundation, and Ecosystem Representative for the DAO Cyber ​​Republic.