Blockchain is on the Path to Replacing Traditional Public Financing

As much as the private and public sectors considerably aid people in their personal and business endeavors, it seems that the efficiency of deploying capital has hardly improved over the last decades, despite the near-absolute digitization in the financial industry.

The issues surrounding traditional public financing are well-known to most people. One might open a news website and find numerous headlines describing securities fraud committed by those exploiting the latest financial bailout initiative.

When a recession, health crisis, or disaster of other sorts hits, seemingly never-ending lines of people start flooding into governmental facilities to receive their share of funding. However, such large-scale collaborative enterprises managed by governments have historically left loopholes for unwanted parties to exploit, while those in desperate need of assistance are left behind.

The Transparent Nature of Blockchains

On the other hand, exploitation of blockchains themselves is a particularly difficult task, it is web platforms and other surrounding applications that can pose higher conventional security threats..

Computer security aside, the verifiable, transparent, and publicly visible nature of blockchain can be the lifeboat perfectly designed for mass funding initiatives; entities like DAOs have already showcased the power of online, on-chain collectives driven by a common goal.

Cryptocurrency enthusiasts will remember how ConstitutionDAO nearly bought the original copy of the US Constitution. Through Web3 platform features like liquidity pools, there aren’t many centralized systems today that could not be replicated on the blockchain and, in many cases, improved significantly.

Loopholes are left by governments and private funders because most of their accounting systems are operated by people who can be vulnerable to distorted or erroneous information, and because no fool-proof verification is set in place to ensure validity.

Differences Between Traditional & Decentralized Financing

An institution or decentralized organization that implements blockchain technology to serve their funding needs can refrain from being dependent on a government. Blockchains are fundamentally fair and cannot be tampered with even by their creators, at least in the case of transparent and open projects.

Non-anonymized teams, ideally structured tokens and ecosystems, and free & open-source software powering the blockchains can be the features that ensure said transparency.

One of the biggest differences between on-chain funding and traditional public financing is that the former may lose (read: give up) control of its blockchain because it becomes operated entirely by the people.

On the other hand, in traditional financing, politicians and government representatives have no limit in managing, changing, and tampering with the systems that people depend on — they remain in control all of the time.

DAOs — Our New Governments?

The aforementioned DAOs are the most promising entities in the quest to solve common problems occurring in traditional public financing, because their distributed and highly democratic fashion allows for direct decisions based on the on-chain voters’ needs, and funding transactions visible on the public ledger.

Anyone with sufficient knowledge can establish a DAO of a variety of kinds, including DAOs focused on finance solutions. No matter if it is a crowdfunding, venture-based, or charity DAO, it can be as transparent and trustworthy as the most reputable one today. This means, the majority of systemic financial operations currently handled by governments can theoretically be replaced by a small group of skilled programmers.

It is obvious that governments are not pleased to see such potential from blockchain developers, which can be confirmed by the increase in cryptocurrency regulation worldwide. However, Web3 ecosystems can still operate as sovereign worlds with some independence, and it would be very difficult to stop DAOs regardless.

The DAO becomes significantly more powerful when it starts focusing on bridging the physical and decentralized financial systems. A financing DAO can adopt the tools of tokenization to serve every individual with an internet connection.

Tokenizing Everything

Tokenization is now possible on nearly any asset that exists in the centralized world — whether it’s stocks, bonds, loans, or other financial instruments, they can be brought on the blockchain and effectively made use of.

Decentralized organizations offering funding solutions can welcome businesses and individuals and tokenize their assets to open up new opportunities available only in Web3, such as quicker access to funds, no centralized control, and transparency from all transacting parties.

The flexible and transparent Layer-1 ecosystem of BlockX that includes products like Tokenizer will in fact enable seamless tokenization helping to merge decentralized and traditional finance, as well as fuel the development of new DAOs that can replace today’s public financing.

We are developing a L1 chain to increase the synergy between the two worlds and open the doors for new funding solutions which cannot be concealed by layers of complexity.

Conclusion

Although traditional public financing continues to help individuals and businesses in need of rescue or chances for growth, it is becoming outdated for the modern age. It would be disappointing to have a future where initiatives like PPP loans continue to be exploited in numerous ways, and where the most desperate may receive the least support.

Financing-focused blockchain projects with all their cards on the table — team members, tokenomics, incentives, voting, and rules- can become valid competitors of government financing, making the process of getting funded simpler, fairer, and more open.

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