Eli Rosner, Chief Digital Officer at Finastra
Decentralisation aims to spread, not concentrate, power, governance and authority. So, are we on the cusp of a libertarian era – or is decentralization a more distant dream?
DeFi talk is lighting up the financial services industry, but it’s just one element of a broader shift to put power, and parity, under the spotlight. This shift is to a world of decentralised everything and it’s an interconnected revolution.
Interconnected how? Well, starting with a typical consumer, the appetite for change begins with decentralised access to financial services. Users expect their banking services to be, firstly, disintermediated from traditional institutions and brought to them where and when they need it, embedded within their specific journey and tailored to their specific requirements, and secondly, decentralised for fairer, faster consumption. Payments and securities financing, for example, via traditional banking systems, are still littered with manual processes that can delay transactions by several days, whereas smart contracts and tokenised assets provide immediate, secure and hyperconnected alternatives; immutable and transparent, and often free from historic or algorithmic biases. This shift has, in part, been driven by the pandemic and access to physical money and banking, and in part by a surge in interest in…
… decentralised currencies, such as crypto which allows users to transact without the need for (and cost of) third parties such as banks or exchanges. Crypto wallets are slowly being added to traditional banking services, despite the current lack of regulation, although one of the most significant spikes during the first year of the pandemic was in stablecoins, which grew by a factor of 18; the pegging to fiat currencies perhaps representing a first, safe step for new investors. Yet, trust in crypto remains high, as seen by…
… significant milestones in decentralised assets and provenance – remember that 2021 was the first year in which auction house Christie’s accepted cryptocurrency and auctioned its first NFT; a digital collection of the works of Beeple. This was no minor foray, but a purchase of nearly $70m and a major step for the >250 year-old institution. This particular trade was based on Ether, the currency of the Ethereum network, but many other…
…decentralised and DLT networks are already in play across banking consortia, mostly in the area of trade finance, designed to improve trust, transparency, provenance and speed, and reduce fraud, duplication and cost. Blockchain really is coming to the fore now, with use cases now being applied to global supply chains, as well as insurance and healthcare innovations, as well as opening up new revenue models for fan communities and IP protection for artists, for whom the web has offered little protection. This is just one of failures of the internet, as the…
…growing concern for democratised, decentralised information demonstrates. Web 3.0 heralds a new wave in information sharing and governance by decentralizing and disseminating the layers in order to equitize governance, protect against monopolisation and reduce network level attacks such as DDoS. This sentiment is echoed in the rise of alternative social media platforms such as Aether and Twitch, to counter the ‘information cocoon’ and algorithmic assumptions that result in unbalanced or skewed content. Protection of data over a centralised network is simpler, through the upward trend of…
…decentralised storage – such as blockchain cloud storage that can separate and encrypt fragments of data to offer a more robust protection against cybercrime by removing the single point of entry or source of data to infiltrate, which is crucial in underpinning…
…decentralised models, such as platforms and marketplaces, which are allowing individuals and organisations to access multiple services and participants in a way that fulfils all their needs within a single domain. Financial services such as SME loans, grants or logistics, can be accessed in a single infrastructure, and lengthy processes such as KYC fast-tracked due to specialist participants or digitised records, and regulators are showing a desire to become an integral part of the decentralisation movement, particularly in crypto, de-fi and superapps, to gain oversight of these new industries and protect against money laundering or the sharing of sensitive information, and to understand the new world of…
… decentralised data. Emerging technologies are allowing for the sharing of data across organisations, verticals, complementary sectors or entire ecosystems, without compromising privacy. As well as solving cross-industry goals or points of friction, the sharing of data protected by developments in technologies such as homomorphic encryption or environments such as ‘clean rooms’, both create the platform for innovative new business models and products and improve the experience for the individual or corporate user…and we go full circle.
Does decentralised truly exist?
The transition to a fully decentralised world is something of a dichotomy, itself relying somewhat on, even potentially creating, centralised decision-making or infrastructures. Each of these elements of the decentralised movement rely on democratic processes or committees that are ultimately run by people and all their inherent flaws; and is therefore subject to the same rules as centralised processes and platforms; admin rights, power imbalances, opportunistic behaviours. After all, ‘every democratic system evolves its own conventions’ and ultimately creates new but different power structures.
