The financial services sector is currently experiencing major upheaval. According to Domenic Carosa and Dan Schatt, the two cofounders of DeFi start-up Earnity, new emergent technologies are threatening to break the status quo with their decentralized, disruptive, and peer-to-peer nature. One of these technologies is cryptocurrency, most notably Bitcoin, which has exploded in popularity worldwide over the past several years. While still not completely mainstream, cryptocurrency enthusiasts are gaining more influence in society as these digital financial instruments allow them to take back their power as investors.
In contrast to the traditional model of finance, Decentralized Finance (or “DeFi”) needs no management from banks, brokers, insurers, and other centralized financial institutions. DeFi gives rise to financial freedom by permitting crypto users and investors to trade, invest, and purchase crypto through a secure virtual market thanks to blockchain technology. As a result, cryptocurrencies provide an alternative way to rebuild trust in the financial industry following the 2008 Financial Crisis.
A lifestyle movement called FIRE or “financial independence and retire early” means living a debt-free life without owing anyone anything. FIRE is concerned with retirement before the legal age, having enough savings to last a lifetime. Cryptocurrencies like Ethereum and Bitcoin can perform like investment assets that profit over time. With the adoption of cryptocurrencies gaining traction, governments worldwide will have to reconsider their position.
Domenic Carosa and Dan Schatt of Earnity both note a few ways global users can profit from using cryptocurrencies and achieve FIRE. Buying and holding (or “HODLing”, according to crypto enthusiasts) onto investments for an extended period is one way to profit from crypto and encourage FIRE. Day trading is a fast-paced way to generate income with higher risks. Mining is a virtual process ensuring coins are issued only after a specific amount of work is finished to avoid oversupply within the blockchain. Looking out for ICOs or initial coin offerings is easy to obtain crypto assets in their developing phase. Finally, staking offers investors the capacity to generate income and vote.