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As much as we like to joke that the world is getting crazier by the day, you can find countless examples where groups of people will generally act in a rational, predictable manner. We as humans do have some biases that don’t make sense, like the phenomenon where losing a certain amount of money causes greater pain than gaining that same amount of money causes happiness. As individuals, we do dumb things all the time. But if you set up a system for people to use, the majority of people will act in a rational way that benefits them most.
With monetary systems, the rules are set and various levers can be adjusted to drive certain behaviors from people as a whole. There is still freedom to act how you want, but the rules will help to incentivize or penalize certain actions. Since people will generally act in a way that benefits them, a monetary system can be managed to handle many different economic situations.
Let’s talk about monetary systems and their various levers, and how it relates to the newly emerging crypto financial system. We will see that there are actually some missing pieces in the current crypto model, and that this will be a limiting factor until crypto is managed similar to a traditional monetary system. Finally, we will look briefly at a platform called Fluidity that claims to have the missing piece needed to unlock the larger crypto ecosystem.
Governments work hard to create a balance in the economy, with the goal of keeping inflation reasonable, prices stable, people employed, and keeping things predictable. In order to accomplish this, some of the key
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