It's more corrupt than broken, but hey, what do I know?
We are seeing how broken the traditional financial system (TradFi) is in the way it's responding to a variety of different global crises:
- Canadian banks confiscate money from people they disagree with.
- Ukranians flee, leaving everything behind. ("Fun" fact: this happened to my family in Belgium during WWII.)
- Russia confiscates citizen's foreign money and prevents ruble conversions into foreign currencies.
- London Metal Exchange (LME) works deal out to protect a Chinese tycoon.
I believe that this isn't new behavior. It's new that we're getting to see it because of the transparency provided by social media. That train of thought, how life, or our perception on life, has changed because of widespread global communications that doesn't have an editor, or an intermediary decide what news is shared.
The banks are intermediaries. Which is a fancy way of saying "toll-takers", whose behavior only changes by regulation. And even then, minimally. Of course, they also tell you they compete with better offerings, but in fact compete by influencing the regulations to serve themselves.
This is where DeFi comes in. DeFI, or decentralized finance, doesn't have that intermediary. Though, I'd argue that there are companies with a DeFi-culture that are bridging the CeFi/TradFi to DeFi world. (CeFi stands for 'centralized finance'.)
Smart contracts on DeFi become lego blocks of capabilities that can be stitched together to create new offerings. This is what has always happened behind closed doors (and that's not a negative thing... for example, Citibank has a great foreign exchange product for institutions; it's' not retail, which is why I think of it as behind closed doors).
DeFi, crypto, DAOs, and more... this is the next generation of technology; emerging through the crisis that are exposing the corrupt behavior of legacy institutions.
At least, that's my opinion.
Learn more by reading this thread:
We're not in the throes of late-stage capitalism. We're living through the late stages and the death rattle of the post-1971 fiat system.
— Logan Bolinger (@TheWhyOfFI) March 7, 2022
Mistaking the two (and basing solutions/policies on this mistake) is a recipe for disaster.
🧵Let me explain 👇
One Final Point
One of the business cases we studied in business school was the US vs China steel industry. The lesson? When an industry competes only through influencing regulations (in that case, import tarrifs which effectively function as price increases for your foreign competitors), that industry gets weaker not stronger. TradFi may win in the early innings because of their head-start, but it's just going to force DeFi to drive even more compelling use cases to demonstrate value. Value that TradFi has left far in the past.