How far away from you is the real – technical control over the financial tools that you operate with? In this article I’m gonna point out the several options that are popular, modern, technical and philosophical.
Paper money and coins
This is the direct – physical type of money that you can control. You could give it to someone else without an interaction of any central authority, third party, software system or service (Doesn’t matter if centralized or not).
The banks give the service to store the finances for us. In the modern times – they offer web interfaces that we could view and order money transactions. There is even a new and incoming standard about it: https://fapi.openid.net/. Banking like services for spending money are now licensed and offered to all kind of tech companies that fix the legacy banking systems. With smart devices – you could pay with plastic, with phone, with a smartwatch – with account in some app like revolute, Google, Apple, Samsung, etc.
Something, that is not felt that way – thanks to the fast software is – we ask the banking systems to execute our transactions and they complete them in 99.99% of the cases. It is fast, it is easy, that covers how the command is actually an ask (please do X with my money). But somethings it does not work. All major modern banking apps and software require one time password – via SMS or from an App.
The banks are advertised as guardians against, theft, illegal usages and a safe net against the bad guys. But, We heard how there are billions in offshore jurisdictions that are all legal? How is all that legal? There is no protection against corruption by the banks. It is not their responsibility, but this is another question.
In my own small personal circle I also saw the opposite of protection. Orders from the Internet hang out in the nothing with the transactions stuck in nowhere. When something fails the money was neither returned in my own account immediately, not it arrives at the recipient – for about two weeks. No control – even with visit to the office of the bank, what is happening.
How are Banking Transactions now?
There is no protection against illegal usage of the plastic card, only aftermath check – after the money is irreversibly gone. Thankfully – a lot of banks integrated second pass authentication. With these temporary numbers before transaction finalizes – you need to be extra sleeping/stupid to fall.
I know a person that had several 1000 leva stolen from their debit card with the help of the plastic and stolen pin code. That person should have activated SMS/Notifications when transfers are done. There is no return or rollback of transactions that were wrong. All the money that was processed was in someone else’s hands. And this is the same with crypto.
3rd Parties with banking licenses
Software Applications and Services nowadays receive banking licenses. As far as I know, they cannot give credits yet. They just offer better and more modern user interfaces over the finances. These external systems could offer better functionalities – login with a fingerprint, notifications and multi-level approval of the transitions and so on.
The crypto finances can function in identical way as the normal fiat money. The only thing is – they could never have a paper representation – they are always digital.
The most eye opening thing about the crypto is the realization that – all money – crypto and fiat, real or digital – they are all just a record in an excel sheet. There is some number and in front – the owner. Just, in the case of the bank, in the front side – there is a person name that is authorized. On the crypto spreadsheet, there is a public key that is derived from the controlling private key.
There is also something else that is good, but also bad – all movement, all transactions are public (except for the Monero blockchain). They could be audited and analyzed and verified with a software, whereas the banking transactions are internal to the bank.
The so called wallets are the tool, that contains the private key. The private key is what controls the account, that is written into the blockchain spreadsheet. There are a lot of applications for a desktop computer and for a smart phones that wrap this kind of software. You should have a lot of caution when dealing with them (especially when installing). Not having knowledge how things work may lead to lose of your money. The best option is to have a flash driver (hardware wallet), that requires from you to click some button on them – for approving any transaction or transfer.
This is the option for direct control over the crypto (profile/account) – by owning the private key. There is also an indirect option.
There is a saying – not your keys – not your coins. You may have some money in crypto, but if it is held in reality by some corporate entity – you are using the crypto with the same old flows. In the banking system you delegate your money to someone else. The exchanges are banks really – holders of the crypto finances. They add and offer layers of protection – the same as the banks (and some more) – only about the storing of the assets. They could give you better web app for the control over the finances. But it is illusionary advantage for the non-tech and non awakened individuals.
The moment someone has a problem with any big authority – the exchanges will act the same as the banks – when freezing and blocking your assets. That will not happen if you hold your private keys. Of course the authorities may get a hold of you physically and then – the least important thing will be – your money.
Stocks, bonds, other stock exchange and financial tools
When some company grows beyond its own income, it needs money to expand, operate or do whatever. Finances could come from several types of sources – foundations, investment funds, public or private investors, in some small cases – from the banks or from some government – in form of credit. The question is what you sign on – to give back. You could give up percentage of your company, percentage of your income, you could negotiate an option (temporary holding of stock – with the possibility to be sold in the future.
If you have connections, some inside information and access, you could interact directly with the owners of the companies. Otherwise – the more layers of brokerages you allow to be present, the less upside you will receive.
If you trade with the public companies, in most cases you are forced to interact with brokerages. Brokers act as bankers for the stocks – the same way as the exchanges for the crypto or the banks for the fiat. You are actually a record in the broker company – and they may show you that you own some stock, but whenever they actually buy it is on their own. Yes they need a certificate to offer that services and they should always have 1:1 in the backyard – to what they show. But, Does the broker truly have it is about the honesty and how much you could trust them. When the levels of layers increase, that increases the changes of misuse.
The real estates are not exactly a financial tool. But, they are very often a target for investment – asset or liability. The last crisis in 2008 raise, because there were too many financial layers beyond the simple – real – product. Buildings are sold with credits. Credits are rated, the credits are repackaged and rerated and resold and so on .The more repackaging – will increase the change of bubbles and crisis.
The layers of ownership on the real estate is also something important. If you own some property, you have notary document. If you have a credit to the bank – the ownership is to the bank and not to you. A building may be owned by a company and you may own some portion of the company. And there is some complexities that could be added to the ownership that will boost the balloon and will also inflate and obfuscate the ownership. That is how the Pandora Documents scandals are all legal and hide the ownership. But, this is not big concern for you. You should aspire for your own success and increase of ownership.