Close Look

Traditional Finance is Getting Richer. DeFi Can Provide a Fairer World


Traditional finance is gloating as cryptocurrencies crash. But there’s so much more to cryptocurrencies and decentralized finance than just dips and highs.

Salaries are inflated away. Banks are getting bigger. And the gap between rich and poor is widening from year to year. What do these things have to do with DeFi, banks, and the Internet of Things?

Traditional Finance: The Current Situation

For several years now you may have been working on your goal to finally buy a house. From year to year, you can afford less as the goods become more expensive. Inflation, banks and our current financial system may be a thorn in your side. But then, you discover cryptocurrencies and Decentralized Finance (DeFi)!

This situation is symbolic of all the hard-working workers who can afford less and less ‘luxury’ from their salary.

The chart shows the wealth distribution in the US, where the richest 10 percent of all people (blue and black lines) hold over 70 percent of total wealth. It becomes even more curious when we use global figures:

According to Credit Suisse, 1.1 percent of the population worldwide owns 45.8 percent of the assets. But how can DeFi or the Internet of Things replace this system?

Traditional Finance: Banks and states invented the game

In our financial system run by intermediaries (banks), everything is based on turning debt into more debt. This can be seen, among other things, in the annual inflation rates, which mean an overhang of demand to supply.

Let’s use Europe as an example. The money printed during the corona pandemic is now seeping into the economy and is now leading to 7.5% inflation in the euro area (April 2022). Year after year, money saved by Europeans for their house is currently worth 7.5% less.


In the European system of reserve holding, a common commercial bank can create €100,000 out of thin air from a €1000 deposit at a reserve rate of 1%. The demand for credit is controlled solely by the key interest rate, which can make the borrowed money more expensive through interest on it. At a current key interest rate of 0%, the demand for loans is very high.

However, we as private individuals have to deposit a security in order to get a loan in the first place. Suppose your house would cost €500,000 and you have €100,000 in your bank balance. So you could borrow €400,000 – but as collateral, you could pledge your house to the bank. Usually, however, people who can deposit a security are those who are already wealthy. Therefore, they can continue to increase their wealth. This view is also shared by Kevin Owocki, CEO of Gitcoin:

“Traditional finance is getting richer and richer!”


If you already own a house, you can deposit it as collateral, take out a loan and continue to invest with it. Plus, the whole system is based on the fact that this asset – the house – gains in value, since goods become more expensive due to annual inflation. In the case of real estate, this effect is of course even more pronounced.

States have become the biggest beneficiaries of the banking monopoly in recent years. They benefit directly from the creation of money. Since the financial crisis of 2008, commercial banks have increasingly bought government bonds of the over-indebted countries in the euro area. This is with money created out of nothing and thus it finances the national debt. The states become the first beneficiaries of the freshly printed money. Read More at BEINCRYPTOCRYPTOCASTER® - DECENTRALIZED FREEDOM!

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