TradFi works through three main participants:
1. You (the customer).
2. An intermediary (a bank, broker, or payment system).
3. The state (the central bank and laws).
How it works in practice:
- Money is held in the bank: Your assets are just numbers in a private database of a specific bank.
- Transfers happen with permission: When you buy coffee or send money to a friend, the bank checks whether you have funds and transfers them from its account to the other bank’s account.
- The state sets the rules: It determines how much money costs (through interest rates), controls taxes, and verifies your documents.
The essence of TradFi in a few words: You hand over your money and control over it to the bank, and in return the bank guarantees its safety according to the state’s rules.
#tradfi
1. You (the customer).
2. An intermediary (a bank, broker, or payment system).
3. The state (the central bank and laws).
How it works in practice:
- Money is held in the bank: Your assets are just numbers in a private database of a specific bank.
- Transfers happen with permission: When you buy coffee or send money to a friend, the bank checks whether you have funds and transfers them from its account to the other bank’s account.
- The state sets the rules: It determines how much money costs (through interest rates), controls taxes, and verifies your documents.
The essence of TradFi in a few words: You hand over your money and control over it to the bank, and in return the bank guarantees its safety according to the state’s rules.
#tradfi