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Attractive Returns & Open Access: Blockchain Offers Access to What Was Once Only Available to the Global Elite

By 9 September 2021January 25th, 2024No Comments

In the midst of a rapidly changing global economy, blockchain opens access to more financial markets with attractive staking returns that match 1980s-level savings account interest rates.

(Figure A Source: The Burning Platform)
(Figure A Source: The Burning Platform)

Previous generations had access to high-yield savings accounts, however, a far less percentage of the world’s population was able to access those rates compared to the number of people that can access them today. Why are the rates getting so low? Today we’re facing what is known as a global reserve currency debasement which started roughly 50 years ago. The purchasing power of traditional fiat currencies has been eroding. Central banks around the world are freely printing money at-will to plug holes into a sinking ship that just somehow continues to stay afloat.

Today’s interest rates for traditional bank accounts are not just once-in-a-lifetime low, the interest rates of today are actually at 670-year lows (Markets Insider), yet, there is still hope with blockchain.

Figure B Source: Visual Capitalist via Business Insider

Blockchain protocols of today deliver access to what was once only available to the global elite. Staking with blockchain ecosystems like Injective and MultiversX deliver interest rates to anyone with an internet connection and a mobile phone. These are the same rates that only a select few had access to back in the day.

While there are still 6 billion people around the world that do not have bank accounts, this number is rising and the barrier to entry is lowering.

(Figure CSource: Bankrate.com)

Three Decades of Decline for Interest Rates

As recently as three decades ago, Certificates of Deposit (CDs) had 12% yields but are now near-zero today (Figure B). Interest rates reached an all-time high in the 1980s. The chart explores 6-month, 1-year CD, and 5-year CD rates from 1984 to 2021. The CD rates peaked to 12% in the 1980s to between 0.15% and 0.28% today (depending on the duration of time a holder is willing to keep the CD for). These near-zero rates are low compared to rates a holder can achieve for crypto staking.

The current era of decreasing buying power for fiat currency isn’t anything new. Drawing from Figures B and C, over the past 500 years, each global reserve currency has gone through a period of debasement. In the 50 years since USD was decoupled from gold, nearly all global currencies have experienced a freefall in valuation at the mercy of economic policies like quantitative easing and modern monetary theory in today’s central banks.

Again, this has been a trend for all of the different, leading global reserve currencies throughout the last 500 years. That list includes Portugal, Spain, Netherlands, France, and Britain. The reign of each global reserve currency lasted roughly a century, including the build-up period and debasement. If history can tell us anything, it’s that this might be happening again. The question is when debasement happened in previous centuries, how did the people know they were in the midst of debasement, and when did the opportunity to latch onto the next up-and-coming reserve currency become available?

What is a global reserve currency?

Since 1944 following World War II, USD has been the global reserve currency. This implies that banks around the world want to hold USD because it minimizes what is known as the “exchange rate risk” for other countries who want to make large trade purchases for something like oil or gold (Investopedia, 2020). Commodities are priced in the global reserve currency, it’s beneficial for other countries to hold it. The global reserve currency is held by central banks for transactions like investments or to pay off foreign debt.

At the height of a global currency’s valuation, savings accounts have strong APYs, then they fall. It’s only on the ground floor where the most lucrative opportunities are available. These APY’s are what investors have been seeing on returns in places like the MultiversX Launchpad and Injective Staking.

Crypto staking accounts and early investment opportunities in early-stage blockchain projects have the highest yields now, as they are comparable with what savings account APYs were around the world 30–50 years ago. That will be touched on more later.

End of an Era?

Experts are looking for alternatives will replace USD in the future. Digital currencies are at the top of the contender list.

According to Crowdfund Insider, Beijing’s 2022 Winter Olympics is when the new Central Bank Digital Currency will be exposed to the rest of the world when the country plans to issue it to Olympic athletes. As of July 2021, over $5B worth of CBDC transactions have taken place.

Interestingly enough, American banks like PNC have released content instructing customers on how to settle trade in the Renminbi as of January 2021. The ability to settle in RNB only became possible within the last decade.

However, China is not stopping at just international trade, but they are including other ways for foreign capital to invest in Chinese markets. In September 2021, China announced that it is opening up futures contracts to foreign investors in an effort to increase its presence as a global commodities pricing power (Reuters). Currently, there are only a handful of commodity markets open to foreign investors, but that is expected to open up more in the near future.

Bitcoin on the Reserves

Then there is Bitcoin. In March 2021, over $65 billion worth of Bitcoin had been added to the balance sheets of companies around the globe. Bitcoin is less focused on the success of one economy than it is a global, decentralized peer-to-peer currency. Where the Yuan or Euro are controlled by one entity, central banks, Bitcoin is held by people in almost every country around the world. The same can’t be said for any fiat currency.

Does this mean companies are preparing to use Bitcoin to settle trades? Not necessarily. But it does illustrate that companies are choosing Bitcoin as a safeguard over traditional fiat alternatives. That might be a good thing as the current system is far from perfect.

There are also other alternative currencies that build on the mission that was started by Bitcoin more than a decade ago.

MultiversX Can Alleviate the Flaws of the Existing System

Perhaps the most significant international economic obstacle is how the prevailing system has barricaded the average person from being a part of it. Most often, to get access to the top private deals you need pre-existing capital and the right network. Additionally, unfair regulations like accredited investor laws stop low-income individuals from gaining access to high-yield investment opportunities.

Perhaps even more staggering is the relatively low number of people around the world without a bank account. At present, about 15% of the world’s population have access to a bank account (1.2 billion people).

That’s where part of the MultiversX mission comes in. The current limitations of public blockchains like Bitcoin are thwarted with issues such as scalability and speed that limit public usage of those blockchains. If blockchain technology is really about getting more people involved in the financial system, then the way we think about blockchains needs to be rethought.

At present, public blockchains are said to only be able to solve two out of the following three issues: decentralization, scalability, and security. When a blockchain is able to solve one or two of these problems, it can never solve the third. MultiversX solves this trilemma with a tested approach to State Sharding in addition to the Secure Proof of Stake consensus mechanism. The combination of these technical specifications allow MultiversX to scale its public blockchain in ways that other blockchains are unable to do.

As Wesley Kress argues, blockchain is a way to reconstruct the current system into one that is more equitable than the existing status quo.

“The existing system inherently promotes inequitable opportunity & wealth inequality. Blockchain systems & infrastructure can re-shape every industry finance, entertainment, supply chain, Content Delivery, Big Tech, food, agriculture, education, politics, government, transportation, healthcare, digital gaming etc. The existing status quo system restricts the majority from participating both in the value sharing (investing) at the ground level due to supposed accredited investor protections & the funding of new value creation (new products/services) unless one has access to capital which currently has very high barriers for the everyday person.”

Even those that do have a bank account don’t necessarily have access to deals that accredited investors do. We’re talking 1% of the top 15% of the world.

As Kress argues, part of why blockchain is so empowering is because it allows individuals to gain access to potentially high-yield deals and savings opportunities with just a mobile phone and internet connection. For savings accounts, this is similar to the valuation of monetary opportunity experienced 35–50 years ago at the beginning of the present day Great Debasement. For access to early-stage investment opportunities, this is unprecedented in the financial history of the every-person. Through the burgeoning blockchain ecosystem, individuals and communities gain the power that was once only held by venture capitalists and hedge funds.

Modern-day attractive returns are what investors have been seeing in places like the MultiversX Launchpad and staking Injective Protocol. These opportunities allow investors to get into the ground floor in ways that only accredited investors were previously able to, as Kress argued. Crypto staking accounts and unique investment opportunities in early-stage blockchain platforms have the highest yields now, as they are comparable with what savings account APYs were around decades ago.

Staking with Injective

When Mark-Cuban backed Injective Protocol launched Equinox Staking earlier this year, investors were staking their INJ to get a baseline return of 15% APY. Investors were thrilled.

Within the first few days, Injective saw over $20 million dollars pour into the platform. That was in-part due to the massive incentivization they were able to deliver to early adopters, like 100% APY boosts (Figure D). While the 100% APY boosts were limited to some of the earliest adopters, even the current 5% APY that is available to all delegators and validators is high. That’s especially true when you compare it to “staking” traditional currencies like the Euro or Pound in a savings account which returns less than half a percentage point yield. At the current rate of inflation, you are losing buying power with every year you park fiat currencies into traditional savings accounts compared to investing in assets or staking in crypto.

Figure D Source: Injective Labs Twitter

Attractive returns of this magnitude haven’t been seen in the last decade. Investors are jumping onboard to participate in these high-yield rates.

MultiversX (EGLD) Staking

The MultiversX community has had a similar experience with early participants receiving historically-high interest rates that match or beat what was once available decades ago for traditional currencies in bank accounts. In October 2020, delegators and validators were receiving between 20% and 36% returns depending on their level of participation in securing the MultiversX network. These rates tripled some of the best 1980s-level savings opportunities.

MultiversX also allows investments in launchpad projects. While there is no way of knowing the potential return on investing in an early-stage company like those on the launchpad, it’s a 21st-century privilege to be able to even have access to those types of deals. Before the last few years, early investments in companies of this size were only available to elite accredited investors. Now all you need is a mobile phone and internet connection.

In Conclusion

Thanks to blockchain, the attractive returns and financial opportunities once-available to the global elite are now available to anyone with a mobile phone and internet connection. As Wesley Kress argues, the current system still has a long way to go, yet, blockchain is bridging the gap.

Many businesses around the world are looking for alternative reserves for their treasury. Blockchain ecosystems like MultiversX and Injective are attractive alternatives to gain access to the same or attractive returns that were available long ago. Will you take advantage?