223

Decentralizing Finance

customers’ behaviour towards financial services and how it is being managed and

deployed. Today, consumers want financial services at the tips of their fingers from

anywhere, at the tap of their mobile screens, wherever they are ‒ in offices, at home

or in a park. Mobility, instant gratification and shorter attention spans are now prior­

ity considerations as financial management and services go mobile and agile.

As such, our discussion covers a broad spectrum of areas (see Figure 13.1) from

the onboarding of customers to financial platforms, advisory via chat-bots, AI-driven

financial predictions from historical data with respect to forward-looking market

data, decentralized payment systems, digitized trade settlements, portfolio construc­

tion and asset management, and the overall framework for decentralized finance to

work sustainably.

13.3  MONEY, FIAT CURRENCY AND CRYPTOCURRENCIES

The three basic purposes of money are as a unit of account, a medium of exchange

and a store of value. Cash is a physical asset with the following features: (i) It is

anonymous, (ii) it is universal, (iii) it is exchangeable from peer to peer (deprived

of issuer details) and (iv) it does not yield any interest on its own (Mohamed, 2020).

Banks are the traditional money makers and preserve their individuality at maintain­

ing reserves at the central banks (CBs). Peer-to-peer interchangeability permits its

exchange among counter-parties without mediators. Universality means that anyone

can take ownership of it, utilize and save it. Historically, currencies were backed by

value, which can be done via gold, silver, commodities or the government. In fact,

fiat money used in the current economic system is considered a currency, and this

includes the emergent use of plastic and digital currencies (digital sovereign fiat). Its

core function is to serve as a customary accepted form of payment by the people in

exchange for possessions and facilities.

Cryptocurrencies are a form of virtual currencies built on blockchain technology,

which may be native or Bitcoin derived, and the first cryptocurrency appeared in

FIGURE 13.1  Broad categorization of decentralized finance. (Author’s own.)