Let’s start with a simple yet undeniable observation: courage is essential in life. But what does this have to do with the crypto world? Quite a bit, actually! When a groundbreaking innovation like blockchain, with all its tokens, exchanges, decentralized finance, and ETFs, enters our daily lives, the first obstacle to its true spread is understanding and subsequent mass adoption.
The general public tends to conform to the standards set by popular influencers or promoters, avoiding the effort of personal research. This approach, common in many aspects of modern society, has both positive and negative aspects. Positively, it allows for the relatively quick propagation of innovation. Negatively, it means the true impact of progress remains constrained by the basic standards of mass adoption.
Many of us have heard comments like, “If it were that simple, someone would have already done it!” or “If it’s always been done this way, there must be a reason!” This is where the courage of true innovators comes into play – those who don’t stop at page 2 of Google but aim for paradigm shifts driven by strong internal motivations.
In the FINTECH world, blockchain and smart contracts are emerging as powerful tools to revolutionize crowdfunding, though large-scale use hasn’t begun yet, partly due to hostile and fragmented regulations. In the US, the SEC has openly shown hostility towards crypto, while in the EU, the Micar regulation aims to integrate tokenized assets into regulated finance, providing a legal framework for crypto activities and fostering innovation while protecting investors against risks like money laundering and terrorism financing.
So far, cryptocurrency-based fundraising has developed in unregulated environments. Some have struck gold, while many have lost their savings with no recourse. The familiarity of tokens to millions worldwide, thanks to their simplicity of trade, is exemplified by the EOS platform’s ICO, which raised over $4 billion in just over a year.
Estimates (GWI) indicate that over 5% of global internet users hold cryptocurrencies today. While many analysts predict stellar adoption rates this decade, one comprehensive study maps the most crypto-adoption-prone areas, with India leading, followed by Nigeria and Vietnam. Surprisingly, the US ranks fourth, while Italy is 36th.
The problem with mass adoption is that many small investors buy tokens without knowing their underlying value, leading to purely speculative and destructive approaches. This has prompted heavy and restrictive regulatory interventions globally, diverting attention from the real potential of flexible, programmable, and ubiquitous financial tools.
Smart contracts can execute actions automatically without human intervention, like paying returns or self-extinguishing at a set term. This unique combination of factors offers enormous potential to reach a massive number of people and engage investors more simply and effectively than ever. Executed on the blockchain, smart contracts are computer protocols that facilitate, verify, or enforce contract negotiations or executions without intermediaries, ensuring transparency and trust.
This has significant financial implications, ensuring the perfect match between the investment plan presented and the actual execution due to blockchain’s automated and immutable processes, limiting fraudulent human behavior. In charitable initiatives, it’s possible to track the real use of each donor’s funds, assuring participants that their contributions are used appropriately.
Combining smart contracts with AI can create virtual Venture Capital structures where sophisticated algorithms match investment criteria with project requirements, enabling automatic investment processes. Blockchain technology with smart contracts offers these and other advantages, allowing global and democratic access to financial markets. Anyone with internet access can participate in crowdfunding from anywhere in the world, breaking down geographical barriers.
The immutable record of all transactions on the blockchain ensures maximum security and integrity. This opens the door to asset tokenization, representing ownership and exploitation rights of any assets digitally. Real estate tokenization, already a reality in many regulated markets, allows investments in real estate without large sums of money, fostering new business models and revitalizing a key economic sector.
Imagine the impact on public spending efficiency and citizen contribution. These discussed technicalities could easily coordinate and operate local communities for self-determined social utility projects. For instance, a small city could use private initiatives to replace inefficient public spending. Crowdfunding combined with smart contracts can brilliantly handle organization, voting, and execution, enabling automatic decisions authorized by the community.
Using governance tokens for transparent and tamper-proof voting can involve an entire community in proposing, voting on, and self-financing projects that directly meet their needs. This could revolutionize “active shareholding,” changing investment decision-making motivations and logic, shifting from elected decision-makers to citizens, enhancing efficiency, utility, and investment relevance.
This potential reimagines Jensen and Meckling’s principal-agent theory, not as utopia but as a matter of time and courage.
Sources:
eur-lex.europa.eu
blog.gwi.com
datareportal.com
chainalysis.com
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