A Tale of Two Currencies: Cash and Crypto

TL;DR

This paper explores the potential of cryptocurrencies and blockchain innovations to improve financial systems, proposing seven fundamental innovations to enhance security, risk management, and adoption of decentralized finance.

Contribution

It introduces seven key innovations necessary for increasing confidence and mainstream adoption of DeFi and blockchain-based currencies.

Findings

Proposed a comprehensive security blueprint for DeFi

Outlined strategies for risk management and investor protection

Suggested multi-chain expansion and DAO integration

Abstract

We discuss numerous justifications for why crypto-currencies would be highly conducive for the smooth functioning of today's society. We provide several comparisons between cryptocurrencies issued by blockchain projects, crypto, and conventional government issued currencies, cash or fiat. We summarize seven fundamental innovations that would be required for participants to have greater confidence in decentralized finance (DeFi) and to obtain wealth appreciation coupled with better risk management. The conceptual ideas we discuss outline an approach to: 1) Strengthened Security Blueprint; 2) Rebalancing and Trade Execution Suited for Blockchain Nuances 3) Volatility and Variance Adjusted Weight Calculation 4) Accommodating Investor Preferences and Risk Parity Construction; 5) Profit Sharing and Investor Protection; 6) Concentration Risk Indicator and Performance Metrics; 7) Multi-chain expansion and Select Strategic Initiatives including the notion of a Decentralized Autonomous Organization (DAO). Incorporating these concepts into several projects would also facilitate the growth of the overall blockchain eco-system so that this technology can, have wider mainstream adoption and, fulfill its potential in transforming all aspects of human interactions.