As I look around the [cryptocurrency](https://leofinance.io/@leoglossary/cryptocurrency) industry, I am uplifted by what Hive is doing.  When it comes to [finance](https://leofinance.io/@leoglossary/leoglossary-finance), Hive is taking the right approach.  Few consider what our present financial system truly is. This is something we will undertake in this article.

To start, we have to applaud the power of [blockchain](https://leofinance.io/@leoglossary/blockchain).  This innovation, brought about by [Bitcoin](https://leofinance.io/@leoglossary/leoglossary-bitcoin), changed everything.  One the solution was presented, the ability to expand upon it began.  Of course, today there is a spaghetti of networks out there trying to duplicate the present system.

Hive is actually on path to accomplishing some of this.  

We are going to delve into the networks of finance that are in operation and how they can be replaced.

![image.png](https://images.hive.blog/DQmbWDLkLutzxQ5JatpACNDu8KJrNXwHnosDajavnuP3xMs/image.png)
<center>[Source](https://miro.medium.com/max/1000/0*dQNoUZ3-eLScx3HR)</center>

## A Californian In Australia

Our story begins with an individual from California in Australia.  This person goes to the [automated teller machine (ATM)](https://leofinance.io/@leoglossary/leoglossary-automated-teller-machine-atm) to get some [cash](https://leofinance.io/@leoglossary/leoglossary-cash).  It is a process that occurs regularly, so often that nobody gives it any thought.

However, what truly happens when our traveler does this?  How does the system work?

Here is where we get into the world of networking.  As stated in the past, our [monetary system](https://leofinance.io/@leoglossary/leoglossary-monetary-system) is a combination of accounting and communications.  The latter, in the 2020s, means digital networks.

For this single [transaction](https://leofinance.io/@leoglossary/leoglossary-transaction) to be completed, we have a host of networks in different engaging.  As we will see, each is keeping a [ledger](https://leofinance.io/@leoglossary/leoglossary-ledger).

There is the network that the ATM machine is tied to.  If it is only a [financial services](https://leofinance.io/@leoglossary/leoglossary-financial-services) company, it will be tied to a bank.  This is network number 2.  Of course, being in Australia, there is the Reserve Bank of Australia (that country's [central bank](https://leofinance.io/@leoglossary/leoglossary-central-bank)).

To go overseas, we are going to have to deal with SWIFT, CHIPS, and/or ABS.  Each of these has a network.  Once inside the states, the [Federal Reserve](https://leofinance.io/@leoglossary/leoglossary-federal-reserve-bank-the-fed) gets into the act.  They have to account for all the money going between the [banks](https://leofinance.io/@leoglossary/leoglossary-bank).  

Finally we get to the traveler's bank.  

All of these networks were involved in this transaction.  Of course, if the individual then goes to have lunch, and pays with a [credit card](https://leofinance.io/@leoglossary/leoglossary-credit-card), we can add [Visa](https://leofinance.io/@leoglossary/leoglossary-visa) and the point-of-sale networks at a minimum.

This is our financial system. 

It is a series of interconnected networks strung together.  Things get only more complicated when we get into higher level transactions such as international [derivative](https://leofinance.io/@leoglossary/leoglossary-derivative) trading.

Needless to say, this is a very complicated way to do things.

## The Power of Blockchain

Blockchain is a new electronic monetary system.  Where Hive excels is through its [decentralization](https://leofinance.io/@leoglossary/leoglossary-decentralization).  Bitcoin gave the world a decentralized electronic [money](https://leofinance.io/@leoglossary/leoglossary-money) transfer mechanism, a network not under the control of a single entity.  Contrast this with all the networks mentioned.

With cryptocurrency, think of all the steps in the example above that are eliminated.  For the lunch, we could legitimately cut it down to just the Hive network if [payment](https://leofinance.io/@leoglossary/leoglossary-payment) is made with [HBD](https://leofinance.io/@leoglossary/leoglossary-hive-backed-dollar-hbd) (excluding the telco's network).  A blockchain does not consider geographic location.  It is not relevant.  The only factor is having the [private key](https://leofinance.io/@leoglossary/leoglossary-private-key) to the [wallet](https://leofinance.io/@leoglossary/leoglossary-wallet).

This is one of the reasons why [base layer](https://leofinance.io/@leoglossary/leoglossary-base-layer-blockchain) transactions are crucial.  Being able to handle a [medium of exchange](https://leofinance.io/@leoglossary/leoglossary-medium-of-exchange) reduces the complexity of the system by orders of magnitude.  It is one area where I think Bitcoin is having issues.  The [network](https://leofinance.io/@leoglossary/leoglossary-network) is not operating for this purpose, requiring the construction of another network to handle most monetary transfers.  Of course, this runs the risk of having centralized [nodes](https://leofinance.io/@leoglossary/leoglossary-node) who take over the largest volume of transactions.

Once we consolidate all these networks into one, we have a robust payment system operating outside of the traditional [financial institutions](https://leofinance.io/@leoglossary/leoglossary-financial-institution) and banks.

This is the power of blockchain.

## Layer 2

Here is where great measure is required.  One of the keys to established a new financial system is to have decentralization at every level.  As we learned in 2022, most of what was created, especially within [decentralized finance](https://leofinance.io/@leoglossary/leoglossary-decentralized-finance-defi), was nothing more than a repeat of what already existed.  In short, we were just changing the names of the entities in control and the [currency](https://leofinance.io/@leoglossary/leoglossary-currency) used.  It ultimately was the same.

Sadly, we also got many of the same results as [corporations](https://leofinance.io/@leoglossary/leoglossary-corporation) such as LTCM, MF Global, and even Bear Stearns.

Second layer networks obviously should be tied to decentralized blockchains.  We know this is getting harder to find due to the way those were set up.  At the same time, these [layer 2](https://leofinance.io/@leoglossary/leoglossary-layer-2) nodes (or [sidechains](https://leofinance.io/@leoglossary/leoglossary-sidechain)) have to be decentralized themselves.  It does not go to centralize the process at this level.  That creates just another vulnerability.

With Hive, we are seeing a couple projects that are focus upon exactly this.  Once we see a [smart contract](https://leofinance.io/@leoglossary/leoglossary-smart-contract) platform incorporated, then we have the ability to create not only [tokens](https://leofinance.io/@leoglossary/leoglossary-token) but also full blown DeFi [applications](https://leofinance.io/@leoglossary/leoglossary-application).  This can be done without the centralization so prevalent in the world of finance.

We dove into [Elon Musk](https://leofinance.io/@leoglossary/leoglossary-elon-musk) and his goal of turning [Twitter](https://leofinance.io/@leoglossary/leoglossary-twitter) into a financial platform.  If we look at it from a network perspective, he is not changing things a great deal.  If the person in Australia example was using Twitter, it might remove a couple steps yet still would have most of the same players involved.

With Hive and a couple layer 2 applications, things could be radically changed.

## Wall Street

We know the financial arena is dominated by [Wall Street](https://leofinance.io/@leoglossary/leoglossary-wall-street).  Some of the biggest names in the history of banking, finance, and money are located there.  We think of these firms as financial institutions but are they?

If money is really the combination of [accounting](https://leofinance.io/@leoglossary/leoglossary-accounting) and communications, aren't the largest money players really nothing more than [digital](https://leofinance.io/@leoglossary/leoglossary-digital) networks?  We covered in the past how Visa is really nothing more than a computer network.  That firm spend billions over the decades creating this interconnected system that covers much of the world.

Using the same analysis as before, consider how much is involved in a single [stock](https://leofinance.io/@leoglossary/leoglossary-stocks) [trade](https://leofinance.io/@leoglossary/leoglossary-trade). How many networks are required there?  We will not repeat the process in this article since the point is clear.  

When it comes to finance, networks are plentiful, convoluted, and involved in everything we do.  Of course, each of these is a [financial intermediary](https://leofinance.io/@leoglossary/leoglossary-intermediaries-financial), requiring permission to be on their network.  The transactions could be rejected anywhere along the way.

As much as Wall Street wields a great deal of power due to the monetary might, it could be their digital networks that make that mammoth.  Controlling the network means one makes all decisions.  This point should be clear.

The way to take down Wall Street is to build applications on networks that are not controlled.  Here is the major contrast.  If cryptocurrency is truly going to take over, the networks have to be different.  Replicating the same thing means cryptocurrency loses.  

When major players are benefitting from the status quo, we can see that disruption comes from going over and above what is in place.

In this era, finance is more about the networks than it is money.

___
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