From Fiat Money to Ethical DeFi

This article is proudly written in partnership with Khalid Howladar, Dr. Farukh Habib, and Deniz Dalkilic

August 15, 1971 Richard Nixon made a fateful announcement: Putting an end to the Bretton Woods System, meaning, that the U.S. would no longer officially convert its dollars for gold. This effectively meant, "Trust the value of our currency and our promise to pay you".

This unilateral breaking of the ‘Gold Standard’ subsequently made the value of other pegged fiat currencies linked to the value of unbacked US dollars. This move established the dominance of US dollars as the global reserve currency ever since and made fiat the monetary standard for all sovereigns.

Until the financial crisis of 2008 brought unprecedented ruin and highlighted the flaws of excessive capitalism compounded by an absence of ethics and socially misaligned incentive structures, the capitalist economic model was considered a successful example. 

Widespread economic displacement, millions of job losses, trillions of dollars of new indebtedness, the list of damages could go on. The government's solution was to socialize the losses created by the crisis despite the fact that the gains had been privatized by the select elites.

We don’t need economic theory or financial charts to show why this is a red flag, such dominance is highly undesirable from a global economic stability perspective. 

Here comes the monetary savior, the rise of blockchain and Bitcoin. 

No one knows who he is or was, where he came from, and why he started the movement that would bring winds of change transforming and disrupting industries, forever. The so-called Satoshi Nakomoto has so many myths the list is staggering. We let you explore it here and pick the one that you think is close to you. 

Jokes aside, his now-famous whitepaper was the seed that created Bitcoin, the world's first widely used digital cryptocurrency based on what we now call blockchain.

As shown in the White paper: A pure peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. This e-cash would be recognized by members of the community as having value and therefore meriting use as a medium of exchange and similar to fiat (real-world) currency.

Community is one of the essential components that made Bitcoin mass adoption possible along with its limited supply of 21 million coins creating room for scarcity and keeping it as a long-term store of value rather than just currency. 

In less than a decade, institutional adoption of cryptocurrency continues, more and more banks are offering crypto services, some of them include Wirex, Revolut, Monaize, National Bank Of Canada, Goldman Sachs, Barclays among others, and El Salvador`s latest move to  Break its USD Dependency that made the top of tabloids recently.

The number of public companies that are taking positions in bitcoin is simply staggering. 

Today bitcoin is simply one of the rock stars in the investment industry and one of the most valued digital currencies that cryptonians keep. It took a little more than a decade to get viral and deeply integrate into the DNA of netizens making it now unstoppable, unbreakable and unapologetically a challenge to the central banking system and their abused fiat currencies.

The Rise of Smart Contracts, Ethereum, and the Evolution of the Industry. 

In his white paper , Ethereum`s Vitalik Buterin argued to bitcoin core developers that Bitcoin and blockchain technology could benefit from other applications besides money and needed a more robust language for application development that could lead to attaching real-world assets, such as stocks and property, to the blockchain, eventually increasing possibilities of removing intermediaries and making smart contracts the norm for transaction execution. 

In a nutshell, Smart contracts allow you to autonomously conduct transactions without human intervention (or error) and perform several tasks. To give some examples:

 Government Voting System

Smart contracts provide a secure environment making the voting system less susceptible to manipulation. Votes using smart contracts would be ledger-protected, which is extremely difficult to decode.

Healthcare

Blockchain can store the encoded health records of patients with a private key. Only specific individuals would be granted access to the records for privacy concerns. Similarly, research can be conducted confidentially and securely using smart contracts.

Supply Chain

Traditionally, supply chains suffer due to paper-based systems where forms pass through multiple channels to get approvals. The laborious process increases the risk of fraud and loss. The same may apply when purchasing a house, car or any other item.

Smart Contracts enabled the creation of an entire ecosystem of developers across the world to build their DApps  (Decentralized Applications) making Ethereum one of the widely used platforms to build products on, to this day.

The first person who suggested the idea of smart contracts was Nick Szabo, but practical implementation of the idea was ostensibly carried out by Buterin and the other creators of Ethereum.

Like Bitcoin, Ethereum smart contracts run on a public distributed network of computers. Everybody can see the execution and results. The more complex way to look at smart contracts is in their use cases. You may refer to the video below for more information.

Literally anyone today could jump and start developing their smart contracts, commercializing them, and developing tribes, that's exactly what had happened during the era of ICO—  a type of project funding using cryptocurrencies.

 Ethereum raised money with a token sale in 2014, raising 3,700 BTC in its first 12 hours, equal to approximately $2.3 million at the time.

The industry did not limit itself to ICOs. Other forms of fundraising such as EDI and IEO came to fruition offering various options both for investors and startups to benefit and bring value to the industry.

Ethereum remains the dominant pioneer in the industry and remains the best chain for many enthusiasts. Other notable players include EOS, Solana, Binance Smart Chain, Polkadot, Cardano, Cosmos all of which have a similar mission and yet different approaches in deploying smart contracts and designing architecture.

After 500 years of CeFi   a new paradigm emerges - enter DeFi 

Fintech products and services have drastically improved financial/banking experience and user interfaces but fundamentally, the role of technology is restricted to being a better facilitator of the old world network of financial system transactions. 

DeFi is a game-changer however. It places new technology at the front and center of the financial services industry to build a new system from the ground up. Done correctly it will allow true peer-to-peer transactions for a more socially impactful economy.

What are the Advantages of DeFi?

DeFi is a financial system that can offer services without any centralized institution sitting between transactions creating friction and charging higher rents to users. 

But wait, what exactly is DeFI?

With DeFi, the markets are always open and there are no centralized authorities who can arbitrarily block payments or deny you access - the DeFI communities through various protocols and tokens can provide most of the financial products needed. 

Transactions settle automatically and immutably on a blockchain – essentially a digital ledger of transactions that is distributed across a network of computers – rather than through a bank database or network.

Whereas banks hold your money, DeFi turns this arrangement on its head by re-conceiving financial services via decentralized software applications that operate without ever taking custody of user funds.

To give some examples, imagine you want to borrow US$10,000. You first need some assets or money already in the bank in the form of collateral. Bank staff will review your finances, set an interest rate for the repayment of your loan, then you get the loan, pay interest, in case of failure, your collaterals or other assets will be taken away from you.

Everything depends on the bank: It sits in the middle of the process and controls your money often with poor service and high fees. Even with Fintech pioneers such as Chime, Affirm or Robinhood, banks still occupy the same intermediary role. That raises the cost of credit and limits borrower flexibility.

Want a DeFi loan? You can get one instantly by simply putting cryptocurrency up as collateral. This creates a “smart contract” that finds your money from other people in the community who made their pool of funds available on the blockchain. No bank loan officer is necessary.

The comparison provided below is one of the great examples to celebrate and support DeFi. 

DeFi gave birth to some of the best projects around such as Compound, Yearn Finance, Uniswap, MakerDao, Curve Finance, Sushiswap, Aave and dozens of others that can be found here making DeFi the darling of the Financial industry.

Today there are already many DeFI projects. In fact, according to DeFi Prime there are 200+ officially registered DeFi projects and there is one more? Why?

The Need for Ethics and the Birth of MRHB DeFi

Unfortunately for the cryptoverse ethics and DeFi don't usually go together. Caveat Emptor (buyer beware!) is the law of the land and scams or frauds known as 'rugpulls' are common. Even beyond criminality, the volatility and risk is very high - not for the faint-hearted. This keeps out many people - excluding them from the new el Dorado of cryptoassets.

Making ѕеnѕе of all recent developments in cryptoverse is tough for newbies. Indeed only a very small handful of реорlе seem to understand the big picture, while for others everything is bаrеlу соmрrеhеnѕіblе, furthermore, complexities and manipulation of markets allowing well crafted and experienced ones to make a quick buck at the expense of the less informed population. 

Marhaba was created to assist the excluded communities, help them make sense of DeFi and provide a crypto 'safe space' for new participants. The founders are fully aligned with long-term community prosperity and success.  Initially, some centralization is necessary but later more autonomous DeFi is the aspiration.

Marhaba simply offers a new 21st-century DeFi implementation of an older, ethical, and moral approach to finance. While religion and cryptoverse don't seem to mix, bringing in some of the older universal ethics (especially around indebtedness and usury) around social justice and equitable opportunities resonates strongly with the mood of millenials and Gen Z who no longer aspire to a neoliberal or Orwellian world to live in.

Marhaba’s ambition is to build an entire trusted DeFi ecosystem that focuses on building an ethical, inclusive, and simple halal ecosystem, and nothing can detail our vision better than a well-detailed white paper that can be found here.