The crypto ecosystem, with its emphasis on democratizing finance and promoting individual empowerment and freedom, stands in contrast to the cautious and often restrictive approach of governments and global financial institutions towards public blockchains and digital assets.
While governments acknowledge the innovative potential of blockchain technology, their actions often do not fully align with the ethos of promoting freedom. For instance, in the U.S., the Securities and Exchange Commission (SEC) has been exerting pressure on various crypto businesses, including cryptocurrency exchanges. Similarly, in Australia, the government is moving towards stricter crypto regulations, mandating that all crypto exchanges obtain a financial services license.
One of the critical areas of divergence is the development of central bank digital currencies (CBDCs) by major central banks. These permissioned blockchain networks represent a new form of money that could fundamentally alter the financial markets. CBDCs might reduce credit availability and potentially grant governments unprecedented control over monetary flows, which could be seen as antithetical to the foundational principles of decentralized finance.
In contrast, Decentralized Autonomous Organizations (DAOs) offer a radically democratic model that challenges traditional governance structures. While the implementation of DAOs at a governmental level remains a distant prospect, their popularity is surging within decentralized finance (DeFi) and Web3 projects. DAOs empower users by returning control to them and providing a democratic voting mechanism for governance decisions. They offer protection against data breaches, surveillance, and unwarranted financial sanctions, thereby promoting freedom and resisting censorship.
The growth of DAOs has been remarkable. From a total value locked (TVL) of $12 million in 2019, DAOs have expanded to approximately $24 billion in 2023, representing an astounding growth rate of over 200,000% in four years. This expansion reflects a growing global interest in decentralized governance models, with nearly 10 million people holding governance tokens and about 3 million actively participating in governance processes across various decentralized apps (DApps).
This trend underscores a significant shift in the financial landscape, where decentralized models are increasingly seen as viable alternatives to traditional financial systems, offering more democratic, transparent, and user-centric approaches.
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