Blockchain will soon overtake all other fintech components as the most important component.
For innovators and investors alike, the financial technology industry has experienced phenomenal growth. However, blockchain will soon overtake other fintech components as the most important one.
The past 15 years have seen incredible advancements in electronic and online payment systems, which have contributed to the success of fintech, with companies like Stripe, Venmo, and PayPal emerging as household names. (Also the development of industry titans such as Mastercard, Visa, and American Express.)
Fintech companies received more than $140 billion in venture funding just three years ago. But since then, investment in the industry has decreased to levels not seen since the administration of Barack Obama, amounting to just $25 billion in 2023, especially in early-stage rounds.
Note that I greatly admire fintech. I’ve spent the majority of my career there, leading Product at Venmo after initially working at Braintree (which PayPal later acquired). I have direct experience with how these businesses have changed how people think about money.
But after going too far with smart contracts and cryptocurrency, I realized that blockchain is the new cornerstone we’ve been searching for to build a new international financial system.
Anything involving traditional finance payments is difficult to build and demands developers to take on a wide range of responsibilities, including managing security, risk, and compliance as well as gathering user data and integrating payments. The system will fail as a whole if any one of those parts is flawed. For any project, that’s a lot of responsibility, and maintaining it frequently calls for tiny armies of developers.
Fintech product development seldom ever exhibits true innovation because so much time and money is devoted to removing risk and compliance hurdles. The intricate network of rules and specifications that have only gotten more complicated as fintech has expanded is ultimately the cause of many of these obstacles.
These are issues that blockchains not only resolve, but also avoid. User data cannot be collected because of universal accounts. A single, adaptable, and universal payment system is provided by the public, unchangeable ledger of a blockchain. Concerns about security, risk, and compliance are greatly reduced when funds held by developers are kept out of their possession.
All things considered, blockchain has removed a great deal of the work that developers typically have to do in order to create applications. This makes it possible for small teams to provide millions of people with really valuable products.
Simply think about the influence that early DEX pioneers such as Uniswap and dYdX have had, emerging from the brains of individual founders to quickly outperform large corporate centralized exchanges in terms of trade volume, and then going on to maintain ridiculously small development teams after that.
Blockchain technology and public key cryptography render many of the antiquated regulations obsolete, despite the assertions of critics that cryptocurrency developers “don’t want to follow the rules.”
Regulators have blind spots and inconsistent policies, as the cryptocurrency industry naturally faces. It never made sense to apply outdated guidelines to newly developed systems with drastically altered features.
The antiquated traditional banking system is stifling fintech innovation. Fintech has a new future thanks to blockchain since it is growing on a far stronger technical foundation with untapped potential.