One Thing We Shouldn’t Forget About Crypto

With all the turbulence in the market, I thought it was timely to revisit one of the core principles of crypto and blockchain technology. Which is this:

Cryptocurrencies were created to cut out the middleman and prevent the need for a centralised authority controlling our funds. 

 

As you know, banks and governments have had the monopoly over the production and distribution of our hard-earned cash for decades.

And I think we can all agree – this is not exactly ideal.

The good news is, crypto gives us another option.

With crypto, and particularly Decentralised Finance (DeFi) we can transact independently of these institutions and avoid third party or counter party risk. The term for this is ‘trust-less’.

On the other hand, Centralised Finance (CeFi) exchanges, such as FTX, Coinspot, Binance etc, require us to place a certain amount of trust in them in exchange for the convenience of using their platform (trusted third party / middleman).

 

Now the truth is, we do actually need these exchanges as they provide the only current way to get our dollars in and out (dollar on and off ramp). When you think about it, this is the same as the current banking system we’re trying to be free of.

We need to remember that while our money is sitting on these exchanges, it’s under their control, not ours. So, I recommend making sure you only have a ‘light touch’ with them. By that I mean, deposit your money, make your transactions, then move your crypto into your own wallet (where you own the private keys) immediately afterwards.

Using centralised exchanges is not the issue. Keeping large amounts of crypto or cash on them is.

I’ll be exploring this further and talking about security and private wallets in the coming weeks, so stay tuned!