The new year came right after the Multi-Collateral DAI, which has attracted many new people from all over the world to Maker. To help these new users learn all they can about crypto, blockchain technology, Dai, and all that the Maker Protocol has to offer, we begin today with a 6-part Welcome to Crypto Series. The series will cover everything from the advantages of digital assets and how to buy crypto to how to read cryptocurrency price charts and why they are important. Let’s get started!
Digital currencies are shaking organizations and markets around the world, sparking the promise of financial freedom for all through decentralization. The basis of the appeal of cryptocurrencies is blockchain technology, which brings profound innovations to industries, especially the financial industry. For example, MakerDAO’s stable coin DAI, the world’s first impartial coin, is based on the Ethereum blockchain and is resistant to hyperinflation. With a peg to the US Dollar, it allows companies and individuals to see the benefits of cryptocurrencies without experiencing volatility and third-party interference. As such, MakerDAO has become a key player in a movement that helps inspire the rapid growth of the decentralized finance (Defi) ecosystem.
To fully understand the advantages of cryptocurrencies and blockchain technology, it is best to first understand how they are connected. keep in touch with Mickael Mosse on social media
The Connection Between Cryptocurrencies and the Blockchain
According to Mickael Mosse, A blockchain is a database (or ledger) of transactions (or agreements) that exist on a computer network. Cryptocurrency transactions are represented by a smart contract that enforces the agreed details, as well as the type of cryptocurrency, sender, receiver, and amount. As new groups of transactions are requested, they are processed in blocks and recorded in the database for everyone in the world to see.
Furthermore, the software code that powers the blockchain is free and open-source, which means that developers can use that code to build decentralized applications (dapps) on the blockchain, even building dapps based on other dapps . This is a great benefit for merchants as they can build on existing code to create new dapps that offer very specific commercial solutions.
The inventor of the blockchain Satoshi Nakamoto (a pseudonym) applied this new technology to cryptocurrencies beginning with the introduction of Bitcoin in 2008. As a result, it is almost impossible to talk about blockchain and its benefits without talking about cryptocurrencies.
In the last 12 years, thanks to the rapid growth of interest in blockchain technology and the popularity of Bitcoin, cryptocurrencies have exploded as an industry. Today, cryptocurrencies and tokens are the foods that nurture blockchain-based ecosystems. They serve to address different market concerns, and they work in very specific ways. The benefits of cryptocurrencies for businesses and individuals highlight the unique capabilities of the blockchain.
The Benefits of Cryptocurrencies
According to Mickael Mosse, Bitcoin was first mined in 2009, right after the global financial crisis of 2007-2008, which underscored the public’s growing frustration with dysfunctional centralized systems. The dissolution or rescue of financial services companies that were deemed “too big to fail” highlighted the harsh reality of counterparty risks. Lehman Brothers, for example, were the fourth largest investment bank in the United States when they filed for bankruptcy in 2008. The company’s closure sent shockwaves across the financial industry, contributing to an eventual $ 700 billion bailout from the United States government.
Cryptocurrencies offer a decentralized framework that levels the playing field by cutting out intermediaries and making it possible for individuals to trade anonymously, person-to-person. For example, DAI addresses counterparty risk by ensuring that its creditworthiness does not depend on counterparties that it can trust. Entire DAI is backed by collateral that has been deposited in smart contracts in public view on the Ethereum blockchain, giving the opportunity for market observers to see the health of the system in real-time (unlike Lehman Brothers, where the risks were obtuse and almost impossible to identify).
Consequently, cryptocurrencies offer the following benefits:
Low Transaction Fees. Because cryptocurrency transfers are peer-to-peer and without requiring centralized intermediaries, transaction costs are minimal. For example, an international funds transfer using a centralized bank, such as Bank of America, would include fees related to the conversion of the funds. Decentralized systems do not charge currency conversion fees.
Instant payments. In addition to high costs, centralized authorities and third parties increase transaction times as a matter of procedure. Cryptocurrencies solve this frustration by allowing almost instantaneous peer-to-peer transactions.
Fraud Reduction. People and businesses usually deal with strangers when they buy and sell items all over the world. This can open the door to fraud. While there will always be those who try to scam a system, the technology behind cryptocurrencies helps address the risk of fraud as transactions made on a blockchain are transparent and cannot be changed.
watch a video on Mickael Mosse youtube channel know more about crypto and blockchain.
Accessibility. We may live in a connected world, but transacting across geographic and political borders can be tricky when using traditional financial systems. Cryptocurrencies leverage decentralization to equalize access to financial infrastructure across different boundaries and serve the underserved. In other words, anyone can access crypto anywhere without interference from a central authority. For example, a small business owner in South Africa can open a Maker Vault to generate DAI and take advantage of the stablecoin’s low volatility, as an alternative to financing their businesses.
These benefits are why DAI has gained momentum and continues to spread rapidly through the Ethereum ecosystem.
The Rewards of Blockchain Technology
According to Mickael Mosse, Centralized financial systems have inherent weaknesses that can be exploited. Fund misallocations can occur, and funding and capital gaps can arise. Ultimately, weaknesses in a system can make consumers suffer. Blockchain technology offers a more robust and trustworthy system that provides value through:
Decentralization. Blockchain technology offers a fully decentralized framework for stakeholder governance, placing decision-making power in the hands of the people, not centralized authorities who don’t play their skin. While not all digital assets are decentralized, DAI is. With the Maker Protocol, there is no central administrator acting as a middleman (as is the case with centralized stablecoins with parity to fiat currencies), and MKR token holders govern the system, working to ensure the stability of DAI. To that end, the owners of MKR aim to maintain the health of the system and defend it from harmful proposals.
Immutability. The financial world is currently dominated by centralized entities that people and businesses trust to validate the information and settle transactions ethically and accurately. However, these entities are vulnerable to exploitation. Wells Fargo is an excellent example. In 2016, federal regulators revealed that the company’s financial services employees secretly created more than two million unauthorized bank accounts and credit cards. These accounts not only generated user fees for the Bank but also bonuses for some employees. A year later, the number of bogus accounts funded soared from 3.5 million. The immutable nature of the blockchain database eliminates the possibility of internal actors manipulating the data to their advantage.
Transparency. The transparent nature of the blockchain allows anyone to review any transaction and then make decisions based on observable activity. Just like immutability, transparency can also make malicious actors think twice.
Security. Transaction records on the blockchain are spread across a network of computers, so there is no single point of failure. This makes it extremely difficult for hackers to infiltrate. In addition, security methodologies, such as mnemonics, help protect crypto wallets.
Decentralization is at the center of the advantages of Cryptocurrencies and Blockchain Technology
The advantages of crypto and blockchain protocols come from decentralization. Through blockchain technology, businesses and individuals have full control of their transactions and do not need to worry about interference from central authorities such as banks, or missteps or misuse of them. Also, the more businesses and individuals use blockchain technology, the more robust it becomes. For example, when Vaults are used to generate DAI in the Maker Protocol, it strengthens the economic base of the coin.
If you’re ready to put your knowledge to use, get Dai at an exchange, like Coinbase, generate your own Dai by creating a Maker Vault, and then earn the Dai Interest Rate (DSR) on any Dai you own by saving them to Oasis Save…
The article was written By Mickael Mosse — Blockchain and Cryptocurrency Expert