Why Recourse is Key to the Growth of Crypto Tokens and Decentralized Finance
“He must master or be mastered; while to show mercy was a weakness. Mercy did not exist in the primordial life. It was misunderstood for fear, and such misunderstandings made for death. Kill or be killed, eat or be eaten, was the law; and this mandate, down out of the depths of Time, he obeyed.” — Jack London, Call of the Wild
The Price for Traversing The Wilderness
Innovation exists at the edge of civilization — a world without recourse for the common man. At the beginning, it is perilous for the common man to traverse that world — a reality that past events such as the Terra Luna collapse (a $40 billion crash), the FTX collapse ($1 to $2 billion in customers funds missing) and the Voyager (a single customer lost $1 million saved over 24 years and is one of many now desperate to recoup funds) bankruptcy clearly demonstrate. A collapse doesn't mean no recovery of funds. Some investors may get a part of their investments back — customers on FTX may recover part of or none of their funds and it may take months or years to get their funds back
What is Recourse?
There are two types of recourse in the modern banking system i.e. from the Federal Deposit Insurance Corporation (FDIC) and the nonprofit Securities Investor Protection Corporation (SIPC).
The FDIC protects the money depositors place in insured banks in the unlikely event of an insured-bank failure. Each depositor is insured to at least $250,000 per insured bank
The SIPC protects up to $500,000 in total coverage per customer for lost or missing assets of cash and/or securities from a customer’s accounts held at a brokerage or a robo advisor.
Of course, this insurance doesn’t encompass a complete meltdown of the financial system. Every insurance has its limits but there is an initial recourse.