Kragx identifies Existing Financial Architecture Challenges

chidoskim (39)in #kragxdefi • 3 years ago

Introduction

Currently, there are various challenges around the structure of most financial systems which have been existent for a while. However, experts and professionals predict the resolution of these issues by adopting blockchain technology in most financial operations and processes using a decentralized finance platform. The current structure of most financial systems operates in a centralized conventional manner; this simply implies that most of the procedures and governance are handled by a central authority. The issuing of the regular currency is supervised by a central bank usually owned by the national government of such a region. This is majorly the prevalent system of financial structure in most parts of the world and it bears certain disadvantages. Some features of this centralized system, which Kragx sees as a challenge include;

The central bodies have complete control and management of the flow and distribution of currency in the market.

Users do not have any control over their assets and often anticipate high returns after some time.

Assets and investments of clients are susceptible to risks and theft when managed by a central body.

Kragx network operates a decentralized finance platform that eliminates the centralized system of traditional bank systems. The management team of the Kragx network identifies certain loopholes within the current centralized system and is confident that their platform can resolve these challenges. Providing a sustainable solution to an existing problem requires a comprehensive understanding and weakness of the issue; hence, Kragx team members performed a thorough review and analysis of the centralized system and observed certain notable issues.

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These issues include:

Human Error

As a system operated by a central body, which is a handful of humans, Kragx believes that there is a high chance of having series of errors. Despite the use of modern accounting tools, human judgment on financial matters can often be impaired by emotions and stress. Kragx network believes that handling crucial financial decisions on a centralized system will likely cause errors that may be irredeemable.

Issues on Printing Money

In the current economic system, the central body dictates when there will be the printing of new money bills and the printing quantity. They often make these decisions based on certain market factors and economic variations. However, it is still subject to a central system, which can be prone to some errors. These errors in printing money may cause events that push the market downhill.

Wrong Market Risks Calculations in Investment Periods

Most investors depend on the advice of financial experts to venture into a business or project and invest their money in anticipation of getting profits. These investments may often be on different market schemes or mutual funds, and the investors pull in their resources to get some percentage profit on their investments. However, some investment calculations given by the experts are wrong and events do not turn out favorable for investors who often lose their money or at best, get an insignificant fraction of the expected return.

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Corruption

This is one of the foremost challenges of the centralized system of financial institutions. Criminal activities and corruption remain the major plagues affecting the central system, and it is often perpetuated within the financial institutions. Kragx network observes that these events are likely to occur, as the banks have a monopoly and total control over printing money and creating investment channels for it, while most of their operations remain unknown to the majority of the public. There is no transparent system where members and users can access how the funds are generated and invested. This gives room for the bank officials to operate in whatever means that profits them. In different situations, they only make decisions and policies that benefit and suit them and their close relatives. Sometimes, these officials print money without having any proper public record and this often goes unchecked. There are several money chunks from investment returns siphoned without a trace and the Kragx network notices these challenges depleting the financial system.

Huge Gap between the Rich and Poor

Another issue caused by a centralized system of governance in financial institutions is the glaring disparity between the rich and poor. This challenge does not exist on the Kragx network because there are transparency and inclusivity for all users on the platform. On the other hand, traditional financial companies place a huge difference between the investment options and offer available for the poor and those for the rich. During shares sale, these institutions often give a higher percentage in most profitable and viable businesses to the rich, while the poor settles for the rest. Profit-sharing also takes the same turn; the rich receive the bulk of profit returns. There are segregations in the conventional financial systems that create this huge gap, causing fewer shares for the middle and low-placed persons in the society. In some cases, certain users are often restricted access to the stock market.

Loans

This is an important financial instrument for business investors and owners. Accessing loans with traditional financial institutions is usually time-consuming and the processing is slow-paced. More so, loan seekers are required to deal with lenders that frustrate their plans and prospects, whose focus is centered on making profits and returns for themselves. The collateral demand for loan access in the current banking system is usually physical assets and users are often liable to lose their properties when they do not offset the loan before the due date. Another issue with accessing loans is that there are several criteria users are expected to meet before they are eligible for a loan.

High Cost with Third Parties

Kragx network also focuses on resolving the issue of the incurring high-cost of intermediaries experienced by investors and other users of the traditional financial system. Almost all transactions and financial processes in a centralized system require the use of intermediaries to verify and execute them. The entire process of performing transactions through third parties increases the expenses incurred by investors. Users also have to wait long periods for the completion of their transactions and loan requests.

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