• World Biz Magazine

DIGITAL TRANSFORMATION - THE FORMATION OF A NEW FINANCIAL SYSTEM & WEB 3.0



Society is constantly evolving and in recent decades has become increasingly digital. This digital transformation of global society is changing the way people interact with the world around them. With it comes countless opportunities and benefits for enhancing connectivity, improving financial inclusion and growing access to trade and public services.


This digital transformation is permeating every aspect of society. Culture, social interactions, and lifestyle are changing. Entertainment, branding, and personal identity are changing. Even humankind’s relationship with the natural world is changing.



Digital assets, a new asset class emerging from the digital transformation of global society, have led transformations in the concepts of money, ownership and value. Digital assets and cryptocurrencies are leading the development of a new financial system.


Digital Technologies


Digital technologies have advanced more rapidly than any other innovation in history. In a period of two decades, they have reached around 50% of the developing world’s population (according to a UN report on the impact of digital technologies).


Digital assets, virtual and augmented reality (VR & AR), gene editing, mobile operating systems and smart home appliances are just some of the recent digital technologies to emerge from this trend.


Digital assets, a new asset class emerging from the digital transformation of global society, have led transformations in the concepts of money, ownership and value. Digital assets and cryptocurrencies are leading the development of a new financial system.



A New Financial System


The new financial system differs from its predecessor in both its goals and its technologies. The goals of the new financial system are to improve access to financial services and reduce transaction times and costs. These changes accelerate the opportunities for global financial inclusion and equity.


The technological building blocks of this new financial system are composed of digital assets, cryptocurrencies, and blockchain technology. Leading this new financial system in ethos is Decentralized Finance (DeFi).



DeFi leverages innovations in cryptocurrencies and smart contracts to build a fairer, more inclusive, and robust financial system. Rather than have banks or other third parties act as intermediaries, DeFi puts individuals at the center of a peer-to-peer financial system that runs on open-source blockchains like Ethereum.


DeFi


DeFi has emerged as a blockchain-based form of finance. It currently includes services such as investing, borrowing, lending and trading. DeFi offers an alternative to the traditional financial system, giving anyone with a smartphone and an internet connection the opportunity to put their money to work on their terms.


DeFi leverages innovations in cryptocurrencies and smart contracts to build a fairer, more inclusive, and robust financial system. Rather than have banks or other third parties act as intermediaries, DeFi puts individuals at the center of a peer-to-peer financial system that runs on open-source blockchains like Ethereum.


A feature that distinguishes DeFi from the traditional financial systems, is that DeFi does not require KYC (Know-Your-Customer). This opens it up and makes it available to anybody with an internet connection. DeFi users have self-custody of their assets, which translates to greater financial independence and autonomy, as it reduces dependence on potentially corrupt third-parties.


Below is a diagram showing some of the differences between Decentralized Finance (DeFi) and Centralized Finance (CeFi).




Adoption


DeFi has already grown to millions of users, using hundreds of protocols, handling tens of billions of dollars in value. A key metric to DeFi adoption is the Total Value Locked (TVL) of digital assets in DeFi protocols, which has grown from $1 billion in June 2018 to more than $75 billion in April 2022 (DeFi Pulse).


At the same time, digital assets have had an exponential adoption rate. As recently as five years ago (April 2017) there were 13 million blockchain wallets, today there are more than 80 million.



# of blockchain wallets in millions


Over the aforementioned five year period, cryptocurrencies have gone from a market capitalization of $27 billion to $2 trillion today, a growth of around x100.


Exponential growth of these technologies comes with rapid developments and changes to global society. One of the biggest opportunities ahead is democratization of access to crypto finance and financial inclusion more broadly.



Access to financial services is vital to prosperity. Yet, in 2022, there are 1.7 billion unbanked adults worldwide. It is so important to give people access to financial services. Leaving people ‘unbanked’ makes them and their communities vulnerable. It impacts quality of life and prevents people from investing in their future.


Financial Inclusion


Access to financial services is vital to prosperity. Yet, in 2022, there are 1.7 billion unbanked adults worldwide. It is so important to give people access to financial services. Leaving people ‘unbanked’ makes them and their communities vulnerable. It impacts quality of life and prevents people from investing in their future.


Lack of access to financial services doesn’t just directly affect the individuals, it impedes an entire nations’ economic growth and development. Consulting firm EY Global has estimated that broader access to financial services could boost GDP by 14% in large emerging countries such as India and 30% in frontier economies such as Kenya.


Seven of the seventeen Sustainable Development Goals promoted by the United Nations see access to financial services as an essential factor in improving the condition of the most marginalized. There are clear, quantifiable benefits to broadening access to financial services beyond what the legacy financial system has offered thus far.



How do we do it? Crypto finance offers a solution.


The most effective way to quickly achieve greater financial inclusion is to leverage a technology that is already widely adopted. In Morocco, one of the countries with the lowest rate of financial inclusion, financial data shows that there are double the number of internet users, as there are people with bank accounts. In other words, the best way to achieve financial inclusion is to have a new financial system, native to the internet.



Web 3.0 is expected to enable anything from micro transactions, to censorship resistant peer to peer data file storage and sharing applications. Offering interoperability, seamless integration, and automation through smart contracts, changing every industry's conduct and operations. Current DeFi protocols are just the beginning of the future evolution of the web.


Web 3.0


The internet has grown exponentially, with innovations such as smartphones, mobile internet access, and social networks driving its growth. As it has grown, it also evolved. Currently, we are witnessing the evolution of the web to version 3.0.


Web 1.0 refers to the World Wide Web’s original iteration, which existed from the 1990s and early 2000s. Web2.0, is the version of the web we are all familiar with today. This is the web that has disrupted industries that failed to integrate its new web-based business model. It is interactive, social media usage is prevalent and many of its largest businesses revolve around data economies.


Web 3.0 is the next iteration, a more open and decentralized version. It stands in contrast to our current generation of the internet (Web 2.0), where data is mostly concentrated in centralized storage spaces. Web 3.0 networks are expected to operate through decentralized protocols; the founding blocks of blockchain and cryptocurrency technology, so we can expect a strong convergence of these technologies with other fields.


Web 3.0 is expected to enable anything from micro transactions, to censorship resistant peer-to-peer data file storage and sharing applications. Offering interoperability, seamless integration, and automation through smart contracts, changing every industry's conduct and operations. Current DeFi protocols are just the beginning of the future evolution of the web.



An ambition of ours at Amber Group, is to improve the user-friendliness of crypto finance applications. This lowers the educational barrier to entry threshold and thus facilitates greater participation in the crypto ecosystem.


Challenges Ahead


This new and more inclusive financial system has already created opportunities for so many. However, there are significant challenges to overcome for achieving mainstream adoption.


The most important challenge is around education, for which there are two solutions. One is to improve the access and quality of education around these topics. The second is to improve the real value that crypto products and services provide to users.


An ambition of ours at Amber Group, is to improve the user-friendliness of crypto finance applications. This lowers the educational barrier to entry threshold and thus facilitates greater participation in the crypto ecosystem.


Another challenge is cryptocurrencies’ reputation of being environmentally unfriendly. This is something we at Amber Group are active about. We have bought the equivalent of 250,000 tons of carbon offsets in MCO2 tokens from Moss.Earth, and partnered with Whale and Dolphin Conservation (WDC), Happy Whale and Whales of Guerrero, to adopt whales and fund research, protection and conservation programs.



Amber Group: Building the Digital Future


At Amber Group, we see our future lifestyle as increasingly digital, increasingly decentralized, and increasingly sovereign. We believe blockchain technology is a fundamental shift in how value is created, stored, exchanged, and distributed and we understand mainstream digital asset adoption is a key component of the global financial transformations we hope to see.


As a digital asset platform, we set ourselves apart through our vision and values; which are to transform the financial ecosystem to be one that is more progressive, inclusive, transparent and sustainable. At the heart of our mission, is our goal to help create a future where digital assets empower people with opportunity and agency.


Through our team, technology and capital, Amber Group is uniquely positioned to support, guide, and facilitate global digital transformations. We are 100% believers in the emerging digital lifestyle and have the support of our investors, who not only share in our vision, but also put their capital and trust in us to achieve it.


Through this support, we have built and continue to grow our team to make key contributions to the digital future, empowering people with opportunity and agency to shape a better world for all.


For more information, please visit ambergroup.io


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