Humanity will never have a better chance of improving finance than we do now; crypto and blockchain will help us.
Suppose Bitcoin (BTC) was born in response to systemic problems triggered by a single global financial crisis. Differences of opinion on the best way forward are the perception of multiple decentralized networks’ subsequent growth. They both accept that the current financial system is flawed, but they are somewhat at odds about repairing it. In a way, each of these networks reflects a different, if incomplete, vision of what could make a better system possible.
For example, Celo uses cryptographic tools and mobile phones to put financial instruments in the unbanked world’s hands. We have seen Compound reduce volatility in financial markets, replacing it with tempo, quality, and transparency. And we’ve seen that MakerDAO manages to hold things secure through benefits rather than physical backing. Each new initiative reflects a fresh and different solution to the financial system or perhaps what it can be.
Despite their variations, all of these networks share the concept of decentralization as a basic principle. As these networks effectively put forward, finance does not need to be regulated by an oligopoly of vested interests and market gatekeepers. Instead, a better framework allows for broad participation, taking the open-source and decentralization principles to a new, fairer, and equal market structure.
As early designers and participants in this new method, we have a real shot at producing something entirely different. But, as capital and power continue to flood into the digital asset space, the challenge is to escape the centralizing patterns that have dominated conventional finance since its inception.
How do we stop actually recreating a new version of the same old system? The response is part of learning from the past. But also of joining and helping ventures and teams that are genuinely contributing to the financial future.
Learning from the past to create the future
In conventional banking, centralization is the norm, making it possible for large institutional players to have unprecedented control. To address this, several models of group governance have been developed for decentralized networks. Instead of making a dozen individuals in the boardroom decide a given token’s fate, these networks place it in the hands of widespread user participation.
Theoretically, group governance requires aligning expectations on value development, storage, and transition, both now and in the future. Theoretically, it is strictly democratic, with the share of speech always distributed in proportion to the asset’s share. In reality, however, it might be a little more difficult.
Even in the deliberately decentralized network, it is still possible to put control in investors’ or service providers’ hands.
Emerging token ventures, in particular, frequently worry about this centralizing trend. They worry, maybe rightly, that they will go through all the difficulties of creating a decentralized network and governance system just to be unduly influenced by a few large holders. This problem is exacerbated when service providers join the picture. Particularly those that provide only one choice of involvement for clients, often together, under one umbrella.
The fact is, we all have a role to play in holding the networks consistent with the spirit of their creation. As providers of utilities and infrastructure, the obligation is especially acute. In order to participate responsibly and prevent a propensity towards centralisation, we need to promote decentralized networks as decentralized networks.
Aligning with the culture and the environment of finance
Neither users nor token projects want decentralized nor de facto centralized networks. And frankly, as builders of what might hopefully be a stronger, more sustainable financial future for all, neither should we.
Infrastructure providers need to ensure a range of participation initiatives to safeguard decentralization. For major service providers, this means providing the owner with a wide variety of participatory processes. It means making it possible or even easy for users to participate as they wish. Either through native sting services, through third-party providers, or on their own.
Beyond allowing clients to participate on-the-chain, safely and as they wish, supporting the wider ecosystem really means supporting each new chain as it was meant to operate. Blockchain developers have a certain vision, and service providers should reach them on their own technical terms. Doing otherwise, making new and emerging chains dependent on the technological limitations of slow-moving infrastructure, does not make us much better off than the system we are working to improve.
At the end of the day, decentralization is both the means and the end of a better financial system — a system based on inclusion rather than exclusion, consensus rather than decree, and intentional, active participation rather than inertia. We may never have a better chance of fundamentally changing finances than we do now. Let’s not waste it away.