Blockchain is the Open Platform of Finance

We have so many blockchains here. From the very first legend Bitcoin, to the newer and more innovative SUI and L2. Things change fast here. At the time of market going up and down, I think maybe it's the proper time to think back of the value inside.

Trusted Network

Blockchain is like the trusted middleman that everyone can be.

People had been relied on financial firms to handle daily financial activities since the internet becomes inevitable thing in our life. On the internet, there's no such official tender for people to ensure it's trusted and backed. So if there's any money-involved activity, you have to find trusted entities, or it'll be too easy to break the contract.

That's why financial firms comes to fulfill the role.

But it comes a price. "Everything is priced in.", so do banks build trust. Trust is not free, either you pay it, or the people you make trades with pay it, sometimes both.

It's also why when using banking services, it always comes with subsequential charges, inevitably.

Cheaper Trust

Banks are too expensive sometimes, how can we get it cheaper, while let us TRUST?

Well, that's also what Satoshi thought of.

Can we get rid of the middleman chains while setting up trust? The answer is Bitcoin, possibly the very first blockchain.

It comes with many advantages.

Open & permissionless, meaning everyone can use it,

Decentralized, meaning that the network is not built by specific entities, and everyone participate in will be a node of the trust ring.

Everyone is technically allowed to join in, share their computer power by running a program and thus maintain the network integrity. It also makes the bad behavior hardly to manipulate the network, as the cost to do it is usually skyhigh. The fee cost is also relatively low compared to traditional banking services. But it still lack of an important feature that was going viral in financial internet. Programmable.

Smart Contract

There're already applications help you to handle your daily financial activities. But the very most are connected with third-parties API, generally banks and other financial firms to the downstream.

It's still the middleman underlying that ensure it work. Even worse, most banks are relatively closed. Data always come with limited access & costs, making the barrier high to down people realizing their idea.

Bitcoin once raise the idea of making app upon it. There must many people tried, but turned out that Bitcoin lacks of the ability to execute code (or too hard to go). There're some OP code inside Bitcoin, but it's not ideal enough.

It was time Ethereum came. It gives the ability to create app(or contract) directly over the network using a high-level language. It has a designed virtual machine called EVM that can run code. And the most important thing is that it's permissionless and everyone can build.

People also discovered it has a relatively low fee. You only need to pay gas(to people who maintain the network), and your app is all set. It also prevent DDoS attack in the way to maintain the stability of the network. Data is also open, people could finally deploy their application on a decentralized network.

Paper contract is now code, enforced by the network. The open financial platform where people can deploy their apps(contracts) upon finally here.

But still, the platform is not prefect.

Decentralized Dilemma

Blockchain network is decentralized. That being said there's no entities that could solely operate the network. Instead, people use consensus to entrust.

In return, you have to pay for using the network. That's gas.

The cost is generally low when the transaction volumn is low, compared to the tranditional financial network. But when volumn is going high at the time market goes volatile it could also be very high.

The idea originally is to protect the network from DDoS attack and reward people running the network. It works, but in the other hand limit the capacity of the network.

And since the network is decentralized, it's in other hand diversified. You could make your own verison to define how your contract works, even there're de facto generalized contract definitions(e.g. ERC20).

It gives both pros & cons. One now has own choices, in other hand makes others not easy to connect.

Last Thought

Blockchain may not sound the best to banks due to the decentralized nature, but it really seems so good on cost & potentical chances that the majority are changing their views.

Stables proves that it could low when you send money across border. DeFi make your financial activities happened on-chain. There're must be more cases to show the unlimited possibility in blockchain.

Though it's still not clear that where blockchain will go. But as long as everyone chained together, it's hard to fall.