Retirement represents a
milestone for most adults, but despite the feelings of adventure and excitement
that come with leaving the working world, retirement must first be viewed
through a financial lens. The ability to generate income in one’s elderly years
is limited, and no one wants to be a burden on their family or the state. That
said, there are social security programs and savings vehicles that are designed
to help individuals prepare for their big vacation.
Pensions are a large reason
why many can afford to leave their careers and take a deserving retirement, but
they used to be more prominent. Unfortunately, the days of working for one
company and being rewarded with a guaranteed lifelong pension are over.
Pensions of course still exist for many companies, but many have struggled to
make good on the promises to their former employees, given harsh realities in
the global economy. Trends like the onset of automation and modern medicine
converge to put pressure on the bottom line while extending their obligations
to former employees.
What hasn’t changed is the
number of people who still rely on pensions. Their situation is
becoming precarious due to the threats facing major pension
funds around the world. Funds tasked with paying out monthly stipends are
struggling to make good on their projected return promises, with many of them
suffering from a lack of funding as obligations rise. The risks of default are
great, not only to retirees but also to the whole economy.
However, blockchain comes
at a crucial time and may represent the savior of pensions everywhere, thanks
to the unique ways that it’s being applied by ambitious projects in the
There is a frightening gap
between the amount of money in pension funds and their outstanding liabilities
to pensioners, and it continues to grow. This deficit means that it’s only a
matter of time before companies cannot afford to continue making pension
payments, which could lead to a financial crisis that eclipses the one
witnessed in 2008. Even government offices are having difficulty, such as the
US Postal Service, which failed to
deliver as much as $34 billion to their pension fund from 2012
The biggest catalysts for
this mess are a serious lack of transparency at all stages throughout the
process and changing legislative agendas. Those with the responsibility to pick
a pension plan find
it hard to understand where the fund is invested, how it performs, and if it
can meet specific organizational needs. Accordingly, it’s nearly impossible to
identify a fund that will act in good faith when it comes to timely and
"There are several
reasons the world’s pension system is failing. One is that the world’s
demographics are changing, with fewer young workers supporting more pensioners.
Another is the system’s low mobility, with most pension plans being attached to
a specific employer, career or place of residence. A third is a lack of
transparency and control for pension plan beneficiaries. We are developing a
blockchain protocol that helps solve these problems by creating a single,
transparent global pensions system that increases pension plan mobility,
reduces friction and incentivizes pension funds to act in consumers’ best
interests," said Anastasia O. Andrianova, CEO and founder of Akropolis, a blockchain-powered pension
Indeed, blockchain addresses
these challenged by working on a shared decentralized ledger, which helps to
align stakeholders in any single system, and provides access to crucial
information that is relevant to all. In few places is this more applicable than
in pensions where a simple ledger-based system would let individuals audit
the funds they’re considering. It also encourages greater accountability, with
reporting mechanisms able to permanently punish funds that don’t follow through
by inscribing results on the shared ledger.
Akropolis, led by
Andrianova, connects individuals, fund managers, and institutional finance in
one greatly improved ecosystem. With an incentivized system for rating funds
and financial entities based on their performance and behavior, cryptocurrency
motivates the maintenance of a system where all aspects of a pension are out in
the open. Accordingly, individuals responsible for picking retirement plans for
their employees or themselves can see what a fund is invested in and, more
importantly, how capable they are of building a sustainable financial future
while honoring obligations.
These features are
fundamental for the pension system. A model so relevant to one’s ‘quality of
later life’ should ideally serve these people directly, yet its exaggerated
level of stratification makes it difficult. One of the most troublesome issues
with pension infrastructure is that it’s overburdened with stakeholders.
Besides pensioners, there
are account and fund managers, pension plan representatives, corporate boards
and trustees, and others who have something to gain from influencing the
process. Even without intentionally sabotaging retirees’ variety of plan
choices, the direct beneficiaries of pensions exercise frighteningly little
control. The ledger will eliminate unnecessary intermediaries and provide
transparency, greater choice, and direct responsibility for pensioners to pick
the investments that are best for them—and them only.
Changing Retirement with Cryptocurrency
Blockchain projects must
address the crumbling pension infrastructure problem facing current retirees
and funds, but it can solve another problem as well. Efforts by working
individuals to save for retirement are waning, largely due to stagnant wages,
as well as rising inflation and debt levels. Millennials are neglecting to look
over the financial horizon out of fear from what they’ll see, but blockchain
adds optimism to the picture.
With trends showing
that less than 66%
of millennials have saved anything for their eventual
retirement, the future looks grim. However, blockchain is creating more
accessible retirement plans that include cryptocurrency investments as well as
traditional financial assets, which appeal to a
Pensions are vital on the
individual level, and yet are also colossal sums of money that require immense
supervision, management, and input. Accordingly, blockchain has come at an
opportune time, when discrepancies in the status quo threaten the way of life
for millions of working individuals and retirees.
Blockchain is already
showing the world how it will solve the most enduring problems in the pension
fund industry. With greater transparency and the lower costs that come with
more convenient ways to address fund management, stakeholders in the pension system
can finally move closer together and align their interests.
for the original article form Investopedia.