Kraken And The Hive Financial Network

It appears that Kraken is finally starting to move to the point where they bring the Kraken Bank to life. Approved in the Wyoming in 2020, the company is looking to roll out services to its existing customers. This will operate under the state's banking laws, the first company to be issued such a license.

This is a step forward for the masses. However, it is not the ultimate solution since it is nothing more than a different captain at the head of the ship. Much in the same way as Coinbase is just a different version of TDAmeritrade, Kraken Bank is another spin on Wells Fargo.

Certainly the focus is different yet it is still approach cryptocurrency as a new asset class. Instead of realizing that we have the technology to potentially change the entire financial system, we have people trying to recreate the existing model. Of course, at the center of it is control.

To me, the lesson of 2022 was Not Your Keys, Not Your Crypto. Yet in the past couple days we saw both Kraken and Coinbase make moves to bring custodial services to the masses.

Once again, this is exactly what Satoshi was trying to get around when the Bitcoin White Paper was introduced. Adding more counterparty risk to the equation doesn't make much sense especially if the infrastructure is put in place to operate in a completely different manner.

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Ecosystem Not Company

The world has a need for banking and financial services. At the heart of the matter is not what they offering as much as who is doing it. Banks are known for their unethical behavior while having spend decades (if not centuries) building an exclusive system. This is something that cryptocurrency can change.

Of course, while some might feel that the likes of Kraken and Coinbase are the answer, they are only, at best, temporary measures. If they become wildly successful, the same Wall Street predators will buy them out. Hence, we would be back at the same starting point.

There is another problem.

Kraken further promises the promotion of digital asset adoption and improved client experience through its bank via "a more seamless" integration between crypto and the traditional financial system.

Source

The company is taking the stance of the new technology integrating with the traditional system. This is the direct opposite of what we discuss on here. Our approach is to build DeFi and then, if it desires, let the TradFi connect to it.

Again, Kraken is just putting a new spin on the same ole existing framework.

For that reason, we have to look at things completely different. At the core of what we proposed on here is the idea of community. Instead of having a company at the center of it all, we have an ecosystem. This shifts the business structure from what we are accustomed to something more decentralized, perhaps a DAO.

For example, the idea of the Hive Financial Network carried some of the ideas that Kraken is looking to offer. This concept was to provide financial services to the ecosystem. However, instead of a company being behind it, we have the Hive ecosystem.

Hive already has the Decentralized Hive Fund, a DAO that was in place as soon as the blockchain went live. We have a funding mechanism that could be utilized to create such a system, most of it at the second layer. Of course, we have to keep in mind that Hive has a native stablecoin.

This is a big advantage to the buildout of something like this.

Economic Productivity

This is a concept that is rarely discussed in cryptocurrency. How often have we heard mention of the economic productivity tied to Ethereum? As we move further towards the idea of the network state, we need to keep considering these ideas.

A financial network is meant to fund economic productivity. Certainly, speculation has taken over to a large degree, a fact that skews the basic need. However, the existing system finances hundreds of trillions of dollars in trade and commerce. This is an important point to consider.

Hive is building assets. There is real value being created here, albeit slowly. The bear market does not help matter yet that is secondary anyway. Economic productivity comes from the builders, the entrepreneurs who look at something and establish a business around it. As stated in the past, each Hive account is effectively a business.

For now, we reside in the digital realm. That said, we depend upon the network effect to bring in users to the different applications. A game like Splinterlands is a prime example of what can happen. During the last bull, due to the growth of the game, many were holding small fortunes with their decks. These were assets that had (and still do albeit less) value. That is a foundation for greater economic productivity.

This is how the system can feed into itself and finance what is needed.

In Conclusion

What is happening with Kraken and Coinbase is a positive for one simple reason: interference.

Anything that places a barrier between the regulators or governments and the industry is a help. They become allies because their business models are designed to profit off cryptocurrency. Sure, they are acting as gatekeepers, leopards with different spots. For now, we can use all the help we can get.

That said, we have to use the cover they provide to develop a true change to the financial system. A lot of infrastructure is still required. That means having the time to generate true DeFi options that can satisfy the needs of the global population.

As always, we are looking to create reserveless, private bank money without the banks.

We do not get there by building more banks that are centralized.


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As anything new I guess any progress is good progress, having this type of companies at least make ppl aware of crypto and as you mention I also think that they are intended to get the clients from Wallstreet into crypto, not common average ppl who will be more incline to a true decentralize network like Hive

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I would like to see how it all plays out. Kraken has been on the news lately I think they are starting to like it a lot.

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I have pleasent experience with Kraken and have nothing against having certain exposure with centralised entitites or mainstream as long as those are not tyranical in nature and practice.

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I'd like to know more about this pleasant experience with them you speak of.

I think central bodies defeat the aim of crypto...I wonder how all this will play out, the odds are against them though. Very few major players in the traditional financial world like crypto.

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Pleasent means, having no problems during many years of use. Hard for me to look at Kraken as part of traditional financial world. Traditional does not like crypto in totality, including centralized exchanges such are Kraken or Binance or most others. I think there is place for everyone as long as we are talking about being free to function and develop in all directions and we are talking about genuine businesses that ought to compete on the free market. Mass adoption? hard to see happening without certain role for centralized entities. Hive is an avant-garde. Just like in music, I see no problem in having mainstream Pop Music with their venues as long as we have freedom to develop our own indie scene as well.

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In other words, those from the mainstream who do not like competition, who cannot stand the existence of the alternatives are anti free market. Anti freedom. On the other hand, for example in El Salvador we have mainstream that is trying to support free market made of free people and their enterprises.

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I have a Kraken account, but I haven't really used it since i first got into crypto five years ago. I doubt I would use any of the services that they are providing there. I am content to just keep doing what I am doing here on Hive. It seems to be working out pretty well for me so far!

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I'll go check them out on the google play store and see what they have to offer. I have been using Binance and it is possible that they may be drowning soon.

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Never used it myself but they might be adding things that make it more accessible to the general public.

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I remember when I first used it I had to do a wire transfer to get my funds in and it was a huge pain. I never really touched it again after that.

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Centralized exchanges are a convivence but you should not store large amounts of money on them. Keep your crypto in your own wallet and keep your keys safe.

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They fancy themselves as a bridge between the two systems. I think they'll have things their way in the short term until the tides eventually change to the opposite direction. I hope they make a good cover for both sides.

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If they can swim long enough, then who knows how long they will be alive. I think its all politics...Nobody in the traditional finance is going to like them unless they have something to gain.

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I definitely think so too. It's probably based on some 'mutual interest' between both parties. Traditional finance will eventually want to gain more too.

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They might. Hard to tell which direction things will go.

As much as we like decentralization, most of the world does not care about that.

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When Kraken didn't leave Silvergate as it fell apart I thought that would be the last I would hear of them, but here they are again.

I think they are trying to fill a role that will not be so useful in the future but let them have their day.

Do you believe that regulators and CEX and crypto firms will find a common ground or continue to fight and lie to each other?

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My guess is the regulators are going to keep pushing under they get this in the hands of the existing financial institutions.

That is who they serve.

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Having more off and on ramps is always better for crypto. I just hope that the SEC targets them before trying to aim for decentralized networks like Hive. They are probably the easier target for the SEC/government anyways.

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The SEC, by definition, cannot target decentralized networks, if they are truly decentralized.

How will they even start the process?

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They can start by targeting the centralized projects on the decentralized networks. I don't think the entire thing can be decentralized

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I agree with your take here, Taskmaster. I have followed Kraken for a few years now, it was even one of the few centralized exchanges I KYC'd (back in 2020). The issue I had with kraken, was that its offerings were relatively limited, and they seemed to push a lot of scammy altcoins, although they had $HIVE listed at one point, not sure now.

The concept of the Hive Financial System is a new one to me, that I guess I hadn't read up on. I will be reading through the article you linked to this one to learn more!

Ultimately, we have to distance ourselves from the fiat TradFi system, otherwise, it will entrench itself in every way, as Silvergate attempted to - and ultimately failed to support. Even with access to the Federal Reserve fictional reserve lending system, Silvergate couldn't stay solvent in the face of the Voyager Digital & 3 Arrows Capital meltdown in May of last year, compounded and ignited by the LUNA/UST de-peg and death spiral.

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Everything you mention is really complex, because the fact that Coinbase and Kraken are setting themselves up as intermediaries between the traditional financial system and cryptocurrencies creates potential risks that will make people's crypto holdings not as safe as they should be.

And the truth is that all this seems a paradox or something contradictory to me

Because what is the joke is trying to recreate the traditional financial system using cryptocurrencies. Weren't cryptocurrencies created precisely to oppose all the vices of the traditional financial system?

I am sure that Satoshi Nakamoto did not create Bitcoin with the intention that the keys to our BTC would be in the hands of third parties. And with this type of thing (that whether we like it or not, they are happening), we are giving input to governments and legislators to put their hands on our cryptocurrencies, just as they have always done with our money.

Very good post, really very informative. Thanks for sharing. Greetings.

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