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Though it may sound highly theoretical and complex, it is actually quite simple. “It works like cash on the internet with a stable value. Other decentralised solutions use it as their unit of account, on which they can build solutions,” Christensen explains. For example, Compound offers a financial solution built on top of MakerDao that distributes loans and enables users to earn interest rates on popular cryptocurrencies (their current interest rate for Dai is 3%). Departing from traditional loans, which involve several intermediaries, Dai is built on modern blockchain technology, so cash flows directly from those who hold Dai to those who lend Dai. Well on its way to becoming a cornerstone in DeFi, Dai’s circulation has increased from 50 to 440 million dollars since 2017 – which is collateralised by assets for approx. 1.4 billion dollars.
Bridging the divide between traditional currency and cryptocurrency So far, blockchain and cryptocurrency have mostly lived a life of their own outside the established financial system. We are not yet able to buy a cup of coffee at the local café directly with Bitcoin. Still, cryptocurrency and related DeFi solutions are used in other – and more important – areas, according to Niklas Nikolajsen, Founder of the crypto-financial service provider Bitcoin Suisse. “The unbanked are already banked; they just don’t know it yet. Today, you can buy a second-hand smartphone for five dollars, sell your services as a web developer, and send and receive payments via cryptocurrency, regardless of whether you’re in Denmark or on the Congo River. That’s amazingly beautiful. Contrary to the established financial system, which has excluded large segments of the world’s population, Bitcoin does not ask who you are. It’s decisions are made based on mathematics and encryption.” Citizens of Argentina and Venezuela, among others, have taken advantage of crypto-financial service providers to exchange their local currencies for stable cryptocurrencies to avoid hyperinflation – a service that the countries’ established banks cannot provide the general population. Despite their obvious differences, Nikolajsen sees a need and an opportunity for Bitcoin Suisse to bridge the gap between crypto and traditional currency through established banks. The company has recently applied for a banking license in Switzerland and has another application underway in Liechtenstein.
Niklas Nikolajsen Founder of the crypto-financial service provider Bitcoin Suisse
