Dragging the horse to water... Finance 2.0
Sometimes, maybe even most of the time, the thing we are searching for is right under our noses. You can lay it all out in plain sight and still feel that you are missing a trick. Which makes the old saying ‘you can lead a horse to water, but you can’t make it drink’ all the more important for today’s blog. Does the way we use finance need to be looked at?
Change can be a stubborn old horse. I was refusing to move with the finance of the future. I was once the horse that needed to be dragged, and even when the water was so close that I could see my reflection, I wouldn’t drink. When I did finally drink the water, I found I was drinking some of the best water I’ve ever tasted, straight from the hills of Mt Satoshi flowing into valleys of Mt Ether. So, I’d like to share my experiences with Finance 2.0 as taking that leap has been one of the most potent, evolutionary and revolutionary steps I’ve ever made.
When I first got into this space, I was overwhelmed by the range of traditional financial businesses that are being upgraded to the Blockchain technology. For example, I can now gain better interest rates on my savings, have total control over my funds and hold assets all at the same time, which I control all from my smart device. Now you tell me a gunslinger that can manage more than that? And that’s all thanks to this lovely thing we call DeFi. And, DeFi is not made by Sony with two speakers and a CD player (MP3 slot or Bluetooth connection for the younger Banditz) it is short for decentralised finance. DeFi is financing 2.0, and the benefits are limitless.
The first big hurdle I encountered with finance 2.0 is getting to grips with the new ways of doing things, through digital devices. Let’s start with a list of things you need to use, which are exchanges, wallets and portfolio trackers.
Most exchanges are user-friendly and as comfortable as operating your standard banking app. Exchanges can either be centralised or decentralised. I’ll let you guess what I prefer…
- Centralised exchanges are more comfortable to navigate and more likely to offer credit or debit card payments. Also, it has the added benefit of order books, which helps you obtain different types of cryptocurrency with ease.
- Decentralised exchanges are known to be the most secure. Still, some have low trade volumes and low levels of liquidity. It should be noted that the whole idea of centralised exchanges contradicts the privacy element of holding your coins, so you’ll need to decide which type of exchange is best for you.
On centralise exchanges you will not own the private key, so technically you don’t own the coins either.
Once you start getting to grips with basic buying, selling, sending and receiving your new digital nuggets, you might want to start thinking about how you’ll store them. You could choose either a ‘hot’ or ‘cold’ wallet, and both have their uses so definitely worth having these in your holster!
- Hot wallets (also known as software wallets) are connected to the internet, meaning they make it quick and easy to access and use your coins. As they are connected to the internet, they will come in the form of an app for smart devices, PCs and laptops.
- Cold wallets are not connected to the internet, making them less vulnerable to hacks. Examples of cold wallets are hardware wallets such as Ledger to something as simple as a piece of paper. There are a variety of software wallets to choose from, so do your research and get the one the suits your needs. Some say paper wallets are the most secure as you have total control over where to store it but, don’t store it under a leaky roof.
Keeping track of all the various crypto assets you invest in is crucial to helping you keep your eyes on the prize. Tracking your nuggets is up there with one of the most important things you can do when you start investing in crypto. It’s always good advice to spread the risk when investing, so that means diversifying by investing in different products, services etc. You can do this through a portfolio tracking app. These apps can often connect directly with wallets and exchanges and can help you keep an eye on those profits, losses and even alert you when the price of your coins goes up or down. Portfolios are significant as this gives you quick access to control what you want to do with your assets.
Finance 2.0 will give you unrivalled control over your money, but you have to play smart in this game. Do not just drink the water without knowing what’s in it, so always do your research. When the central banks of the world print more money, the value of our currency depreciates. Look up “shrinkflation” if you want to see how this works in day to day life. This was another thing that drew me towards this space and convinced me to ‘drink the water’. It allowed me to store my crypto assets outside the traditional banking system, protecting my nuggets from the dark power of inflation. For me, slowly detaching myself from the long arms of the sheriff and their no-good banking system has been liberating. I believe taking ownership of my finances, gives me better control of my funds and is a profoundly fulfilling experience.