You have probably heard of Blockchain and you’ve heard of crypto or crypto currency. More than likely you (like me and others) associate those terms with Bitcoin or Ethereum or NFT’s. We tend to think about it in terms of traditional finance and traditional investment instruments. But the crypto currency world (sometimes referred to as DeFi which stands for decentralized finance) is different in many respects and it warrants your attention. In this blog, and others to come, I will explore these topics and will share with you my experiences as I venture more and more down this rabbit hole. I make it sound like I’m going to the moon. The reality is that almost 300 million people are using some kind of crypto. A recent informal poll I conducted with my friends and family indicated almost no one is looking at this in a serious way. If my friends and family are like that, then maybe yours are too.
My main motivation to do this stems primarily from a desire to explain what is happening in a more abstract way. There is no shortage of info out there but in my opinion there is also too much noise and the approach is not just inadequate but potentially wrong and some of it dangerous. I also think it doesn’t get to the crux of the matter. You see, looking at the DeFi world is not as simple as saying oh you mean bitcoin or doge coin. What’s happening before our eyes with Blockchain and DeFi is changing not just the way the finance world works but how we operate as a society and it is doing it in a very fundamental way. This has serious repercussions. As Clay Shirky said in his book “Here Comes Everybody”: “anything that changes the way groups function will have profound ramifications for everything from commerce and government to media and religion”. So the changes that are happening are profound, but just how profound? And what do we do? First, my statements are not meant to be alarmist. They are meant to be a wake up call. And if I can attempt to understand it you can too. We can also ignore it but it doesn’t mean it’s going away. So let’s dive in.
“anything that changes the way groups function will have profound ramifications for everything from commerce and government to media and religion”. — Clay Shirky
Imagine you went into a coma in 1985 (the year AOL was started) and woke up in 2022. Think about all the changes that have happened since then on the internet. The same thing is happening today with crypto currencies and blockchain. Think about the way content (e.g.. music, movies, books) was delivered in 1985 vs today. It was difficult to envision in 1985 you would be able to listen to any song or read any book or watch any movie right from a mobile phone. These changes created a sort of crisis for traditional content providers. Today it is easy to mentally go back to see the changes but it is more difficult to see them and understand them in real time. This is because the changes are slow and fuzzy. To understand the crisis and the changes they cause, we can take a lesson from science. As Thomas Khun explains in “The Structure of Scientific Revolutions” all crises begin with the blurring of paradigms. I believe this is exactly where we are. We are in the middle of a paradigm shift. We are in the phase where we are witnessing and recognizing “anomalies” which in turn will give rise to a crisis and ultimately a challenge to the dominant paradigm. In our example, DeFi is challenging traditional centralized finance. In this phase, those closest to the impact zone (i.e. those closest to traditional finance and government) react in different ways. Some renounce crypto currencies as “fake money”… or they create fear, uncertainty and doubt (FUD) saying “it’s the wild west”. Some are unable to tolerate the crisis, as is the case in places around the world where they are banning crypto currencies. Others are embracing it in an apparent way to eliminate any apparent crisis such as El Salvador.
Crises give rise to paradigm shifts but they all end in one of 3 ways:
- they fade away and everything returns to normal
- they are postponed or delayed for future generations for any number of reasons
- a new paradigm emerges as do the frictions that accompany it.
Whether you agree or not that we are in the middle of a paradigm shift, it is difficult to ignore the impact crypto currencies and DeFi are having around the world. Pay attention to the current events in Ukraine and how crypto currencies not only play a role but how they are portrayed. Who is an advocate and who is not? We will continue to see an increase in visibility of crypto currencies. This is your call to start to understand this new world. Don’t worry if it doesn’t make sense at first. What we see and understand is largely dependent on what we have been taught. For the time being, we will try to make sense of this new world with terms, examples and jargon from our current paradigm and that’s ok. After all, new paradigms are born from old ones and they tend to use much of the jargon and tools employed by the previous paradigm. Kuhn gives many examples of this. I for one am excited about the possibilities blockchain and crypto currencies will bring. What changes do you think blockchain and cryptocurrencies will bring about that may not be readily apparent? Comment and let me know.
Stay informed.
