How DeFi Can Free Us From the Misogyny & Racism of Banks ✊🏽 (While Making Us More $)
Any American who has ever had a consumer savings or checking account knows the drill: We give them our money, and in return, they pay us maybe 1% interest per year - if we’re lucky.
Credit: The Deliberate Agrarian Blog
An old bank of mine that I was loathe to use because of the fees and the uncaring customer service recently emailed me. They wanted to inform me that instead of making 0.6% per year off of my savings account, I would now be paid 0.5%.
It’s a fucking joke.
For those who may not be aware, the way banks make money is as follows: they take our deposits and invest them in assets that then make the bank exponentially more in profits than what they relay back to us.
Banks quite literally get rich off of our backs - and then they charge us criminal fees in order to move our own money. The very funds we have been nice enough to allow them to hold for us.
It gets worse: in early 2020, the US Congress passed a law enabling banks to invest consumer deposits in venture capital, the asset class that funds high tech. Venture capital is notoriously misogynistic and racist, and as the female founder of a cryptocurrency startup, I have experienced that misogyny firsthand. In 2017, 2.2% of all venture capital went to startups founded by women, and women of color received less than 1%.
Banks can legally take our money and invest it in vehicles that actively discriminate against us…and get richer for doing so.
As if the endemic misogyny and racism were not already heartbreaking enough, then there are the terrifying moments at which the poor design of this system completely breaks down:
AFP/AFP/Getty Images
The above image shows a Depression-era run on a bank.
Banks employ a technique known as “fractional reserves,” which means that 100% of consumer deposits are not available for withdrawal at any given time. The bank keeps only a fraction of those on hand as they invest our money elsewhere.
This practice directly contributed to the 1930s-era global economic collapse.
It seemingly necessitated the formation of the FDIC - government insurance of our deposits, up to $250,000 USD. One very flawed centralized entity propping up another.
Avoiding a second Great Depression also fueled government bailouts of failing banks during the Great Recession of 2008, and through the 2020 economic turmoil catalyzed by COVID-19. We the People experienced the way the government protected Wall Street firms… even as it abandoned its own citizens.
Thankfully, much if not all of this can be transcended through usage of an economic system of superior design, like the one DeFi offers.
With DeFi, or decentralized finance, we have 100% custody of our funds at all times. No entity can employ fractional reserves, because they don’t have control of our money. An institution like the FDIC is rendered moot.
Through DeFi, we can also democratically act as a source of liquidity for one another. Instead of banks getting richer off our backs, we can support our fellow humans while accruing fees ourselves. It’s a win-win.
Looking at the fees rewarded to top-performing Liquidity Pools on the most popular decentralized exchange, Uniswap, we can see that those who stake their money in DeFi are accruing annualized rewards of sometimes more than 40%.
That’s 80x better than the 0.5% annualized interest dictated at me by my corrupt old bank.
Want to learn more about how DeFi works, and how to benefit? I break these systems down in further detail in our webcast (and go through a pretty substantial Q&A as well).
What’s more, when you give to someone in need and receive SEEDS cryptocurrency in thanks, you can engage with an ecosystem that is working to empower the generous - because we know that in helping you to build wealth, we’ll be giving you the tools you need to do even more to improve this world.
The bottomline is that we don’t have to prop up these bad system any longer. A better way is already here. 💗
-Rachel