First, there have been property rents. Then got here pursuits. As fashionable civilization evolves, folks all the time discover new methods to earn cash with out really producing, and even doing all that a lot. This idea is right now often called “passive revenue.” Technological progress additionally expanded the that means of passive revenue.
Immediately, folks can declare YouTube commercial revenues, dropshipping and even creating on-line programs as their favourite means to earn passive revenue. Lennix Lai, the director of economic markets at OKEx, believes there may be one other technique to add to this ever-expansive record: crypto staking. He was a keynote speaker throughout the Blockchain Financial system 2020 convention in Turkey, the place he defined why crypto is a perfect means to earn passive revenue. He additionally instructed Cointelegraph what could be the advantages of a more experienced blockchain-based monetary system.
Cointelegraph: What do you imagine is the subsequent logical step for blockchain and crypto?
Lennix Lai: The rising variety of cryptocurrency pockets customers creates a completely new ecosystem. First, there are going to be regulators and central banks. Individuals enter this new ecosystem by storing their digital asset wallets on their cell phone or their pc first.
Then the ecosystem will begin to construct decentralized functions, DeFi tasks or stablecoins. Proper now, we’ve about 35 million cryptocurrency customers. However after central bank-issued stablecoins, we are going to discuss billions of customers.
We’re moving into the subsequent era. The following era is going on proper now with nationwide bank-issued stablecoins, I imagine. I’d say it is going to develop the cryptocurrency person base like 10 occasions or extra.
CT: It seems like the subsequent era of blockchain is “blockchain for everybody,” not simply corporations or exchanges?
LL: Bitcoin is the first use case leveraging the blockchain idea. With out Bitcoin, blockchain is just a decentralized database. It is only a database language. We simply need to retailer data in a decentralized method. However including the aspect of cryptography to this decentralized database has resulted in the creation of Bitcoin. […] However nonetheless, it was a really “geeky” undertaking, actually focused on heavy believers and visionaries.
For the subsequent era of blockchain, we want to keep the great thing about blockchain first, immutable, scalable, open to everybody, tremendous low entry-level in phrases of transaction prices, tremendous excessive effectivity. Then, we want to deal with the technical difficulties of blockchain in phrases of safety, scalability and decentralization.
At the identical time, we want to take governments and regulators into consideration as nicely. They need to have a superior monitoring authority that may see the transactions inside the blockchain. That is why we anticipate governments and regulators to be part of this decentralized ecosystem we’re constructing with OKChain.
CT: How do you make the most of crypto for a passive revenue idea?
LL: The mixture of cryptocurrency and DeFi creates an alternate means for customers to earn passive curiosity that was not doable earlier than. As a result of historically, chances are you’ll want to deposit to the financial institution or reserve a depository for saving curiosity. You should buy bonds, and you’ll lend to someone with some curiosity. However that is a restricted means, and it entails many analysis standards. Generally, it is difficult to safe a mortgage, particularly for small and medium enterprises.
Crypto, initially, introduces a permissionless means for passive curiosity. Everybody can securely borrow and lend inside the protocol in accordance to the design of a sensible contract. You possibly can have borrowing and lending with out the financial institution sitting in between.
This considerably drives down the barrier of entry, particularly the unbanked inhabitants of the world, who would not have entry to the conventional banking system. Proper now, we’ve round at the very least one-fifth or one-sixth of the world inhabitants with none banking help. They can not open a checking account in any respect for varied causes.
However proper now, we’re speaking a few protocol that may serve even rural populations round the globe, and not using a financial institution. That may be very thrilling as a result of we are able to now create a imaginative and prescient that claims your cell phone shall be your financial institution. With none financial institution accounts. You are able to do something that often a financial institution allows you to do through your cell phone with a cryptocurrency pockets. You possibly can pay, obtain cash, earn curiosity and make an funding — all executed in a decentralized method.
CT: Do you suppose passive revenue by staking crypto shall be a preferred means to earn in the future?
LL: Staking is a singular passive revenue profile that would by no means be accessible in the conventional banking market. There isn’t any staking product in banking and finance. As a result of what staking does is, mainly: You deposit your token in a sure protocol. That token will then assist to safe the stability of the entire community.
By staking, you turn into a part of shareholders/validators/protectors of the community. You’re part of the community itself.
The rate of interest return proper now could be a lot larger than conventional banking. So, it may very well be a very popular matter. As a result of certainly one of the nice advantages of adopting crypto is, except for easy switch and defending property, to earn passive curiosity.
CT: Do you’ve some other plans for making crypto accessible to a a lot larger viewers?
LL: We have now to make crypto easy first. Proper now, all the tech you hear like blockchain, good contracts or non-public keys are nonetheless tremendous sophisticated. Most of the blockchain trade consists of high-end builders. And merchants’ world wants very advanced derivatives which we offer at OKEx.
However once you discuss mass audiences, we’ve to make it quite simple. We do not discuss non-public keys or some other tough idea. We purpose to launch a brand new product that any unusual person can join, purchase a cryptocurrency with their native foreign money, and earn passive curiosity by staking cash.
CT: The extra blockchain-based finance evolves, the extra it resembles the conventional finance trade all of us love to hate. How will the “blockchain financial system” differentiate itself from the present centralized finance system?
LL: That is an excellent query. Can we put every little thing on the blockchain that is in the centralized system proper now? I do not suppose so. First, the centralized system proper now could be working fairly nicely. It’s gradual typically, it won’t be very environment friendly. However the measurement is so huge, with volumes of trillions of . It is a strong monetary system proper now.
Additionally, due to the elevated laws, the conventional market is getting much more environment friendly than earlier than. Numerous regulation that we discuss is expounded to checking, to disclosure. For instance, the financial institution wants to disclose their steadiness sheets, and the safety agency wants to disclose the entry of the consumer, the fund supervisor wants to disclose the purchase and promote orders, and so forth.
If you consider the blockchain idea, you do not want a regulator to play this position as a result of every little thing could be executed on a technological foundation. It is immutable. It is clear. Everybody can see it, together with regulators. Every transfer and transaction is logged on-chain. In abstract, we are able to serve the very same regulatory objective with a fraction of the prices that the regulators are spending proper now.
So, with blockchain expertise, the price of sustaining a wholesome monetary system could be a lot smaller whereas serving the identical aim and objective. That is why I imagine the conventional finance world will finally undertake blockchain expertise to cut back prices and enhance effectivity, particularly in phrases of regulatory processes and cross-border transactions.
The interview has been shortened and edited for readability.