Your Digital Self: The fourth evolution in finance is here today — why decentralized finance is inevitable

With inflation at a four-decade high in the U.S., worldwide oil prices surging, and wars and other calamities raging, it’s no wonder many worry about the future of our society.

Are global economies and their value systems imploding, or is the world undergoing a natural transition from one epoch of financial evolution to another?

To find an answer, I had a chat with Chris Coney, a lecturer and owner of Cryptoversity, described as “the world’s first online school to teach courses on bitcoin, cryptocurrencies and blockchains.” Chris has a lot to say on decentralized finance, the most recent evolution in finance.

MarketWatch: What is the cause of current problems that both crypto and traditional markets are facing?

Chris: If you want to get to the very root of the issue for both crypto and traditional markets, you end up with the same problem: How to measure the value of the assets accurately.

This is such a huge problem because there is no constant that we can use to establish the true value of an asset. For example, in engineering we have constants such as “kilogram” or “meter”; 1 kilogram always weighs the same no matter who you are, where you are on the planet or what year it is. It is constant. The fact that a constant doesn’t change means you have a foundation for comparison.

The problem with markets today is that everything is priced in U.S. dollars, which are not a constant. If I handed over a dollar bill in 1913, I would be able to buy 16 loaves of bread. In 2022, I can barely get one loaf with the same amount of money. If loaves of bread were 16 times larger than they used to be, I could understand it, but they aren’t.

The fact that the U.S. dollar is not backed by anything and can be printed at will means it has a floating value. It’s OK for goods and services to fluctuate in value against each other, but if we don’t have an anchor — a constant measurement — somewhere, everything becomes relative and leaves us unable to establish the true value of anything.

This is where bitcoin

provides us with the very first economic constant — there will only ever be 21 million bitcoin — and acts as an ideal anchor between traditional financial assets and crypto assets. Just as bitcoin is a better alternative to the U.S. dollar, so is decentralized finance (DeFi) a better alternative to traditional finance. And it’s inevitable.

MW: Why do you think that?

Chris: It is beyond debate that technology has gone through phases of evolution, which I call the four epochs of financial evolution.

We started with the personal-service era from 1900 to 1960, when everything was done physically on paper-based records and your banker was an actual interactive person who represented the bank.

Then we moved into the self-service era of 1960 to 1990, when the early automation technologies were invented. We got the first basic ATMs allowing you to interact with the bank directly instead of speaking to your banker, credit cards — early electronic money — and telephone banking.

Next came the fintech era of 1990 to 2010, when PCs and the internet started being used for banking. We got mobile banking apps, online brokers, price comparison websites, paperless utility bills sent via email, e-commerce, crowdfunding and more.

Now you don’t even need to walk up to an ATM; you can connect directly into the bank’s computer system and do your banking online.

The invention of bitcoin and, thus, blockchain technology in 2009, was the start of the fourth epoch, which is the DeFi era. This is where we build a free and open financial system that is not centered around large, powerful and corruptible corporations.

This era of financial evolution, which we are entering into now, has what I call “The DeFi Dream Team,” which consists of:

The internet, which provides the network infrastructure for all.

Crypto and DeFi, which provide the financial infrastructure.

Smartphones, which provide personal computers for all.

Starlink, which provides a communications infrastructure.

Starlink, an offshoot of SpaceX, has built a network of 2,400 satellites that provide high-speed internet access globally. By placing the Starlink satellite dish on the ground and pointing it at the sky, even in the most remote villages in Bangladesh, people will be able to use a $30 Android smartphone and a solar panel to access the entire DeFi ecosystem.

MW: Taking into account the current global situation and its interrelatedness — wars, high oil prices, inflation, crypto winter — why do you think the future is inevitably decentralized?

Each epoch of financial evolution started with a technological breakthrough that acted as a catalyst. The self-service era began around 1960 when major computer advancements made it cheap enough to computerize everything.

Readily available, mainstream internet access gave birth to the fintech era because it helped increase the number of people who could access such services to make it viable.

Then in 2009, blockchain technology enabled the DeFi era.

Each technological breakthrough cut out a layer that was previously sitting between the individual and their money. Each evolution led to an increase in freedom, power, control and prosperity for the individual.

In previous tech eras, more was done for you, which required more trust being placed in another person. But as we went forward, there was ever-increasing empowerment, the ability to do it yourself, with less and less trust required and more control in your own hands.

DeFi is the apex of financial evolution since there is no person or company standing between you and your money. There is also no need for you to trust any person or company. This is why a DeFi takeover is inevitable. For the individual, it’s just too good to resist.

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