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Moving Toward the Status Quo – How Crypto Is Beating Legacy Interest-bearing Accounts

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The massively low interest rates that have kept the international economy alive have been a blessing for many. However, for those holding funds in money market accounts and cash deposits, their interest earnings are sorely lacking.

What’s more, investors in Europe are now finding that their deposits are receiving negative interest. In other words, a deposit held in cash will be worth less in ten years than it is worth today. With this shift in economic policy, investors are driven into the market, hoping for returns in equities, commodities, and the like.

Money markets matter

However, this doesn’t mitigate the necessity of having systems that allow investors to place funds and receive interest without risk. All investments have risk associated with them, but the nature of cash has always been intentionally risk averse. Like gold and other precious metals, cash has always been considered a safe haven of sorts, assuming governmental stability.

This type of safe haven investment structure is critical. While the market may have reached historic highs, the need for investments that are protected from inflationary pressures and sudden declines remains. In other words, money market funds that bear interest are an important part of any investment structure.

But crypto?

This need for interest bearing investment holding accounts is just as important with cryptocurrencies as with legacy investments. Of course, the nature of cryptocurrencies is inherently contradictory to interest bearing systems, since it assumes that each user is an independent investor, and all funds are held in decentralized systems.

This does not, however, mitigate the need for some system that moves between investment and safe haven. This is where the new system from Constant is fitting a very specific and important niche.

Called Flex, the new offering provides up to 5% interest on deposits made on the Constant platform. This means that investors can place their funds into an account with the intention of investing, and move the funds at their leisure, while earning interest, not unlike a legacy banking system.

From this account, users are able to participate in Constant’s DeFi peer-to-peer (P2P) lending platform. Investors are able to offer their funds for lending on the platform, and can require a specific interest rate. Borrowers seeking capital can offer to borrow at certain rates, and Constant simply plays the middleman, connecting users to one another. Funds are secure, and returns are linked together on the system.

Better than banks?

This system provides the fundamental improvements that have caused such dramatic interest in the cryptocurrency and Bitcoin worlds over the past years. Banks have continually been lowering interest rates, and keeping funds internal. Crypto, on the other hand, is moving toward greater investor flexibility and returns.

What’s more, with a system like the one Constant has begun offering, returns are far greater for those seeking to keep their funds in safe haven accounts than anything that the legacy market can even begin to offer. A 5% return on investment funds isn’t available in any bank in the US  or internationally, and the movement of the international investment community is away from interest bearing accounts, rather than toward them.

No wonder the shift is moving toward cryptocurrency options. With companies like Constant and others beginning to offer flexibility and returns, the direction for the overall industry is strong. What’s more, as the growth in adoption increases, and the desire for greater levels of financial independence rise, investors will do more than just pursue interest and will inevitably begin moving away from legacy systems.

As the growth for the industry continues, it seems clear that Satoshi was clearly right in his original vision for Bitcoin. The p2p nature of the industry allows investors the opportunity to ‘have their cake and eat it too’, as the old adage goes.

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