Parts of the capitalist economy’s structure has become rusty. Incumbent organizations in the financial sector are being challenged across various segments, such as payments, lending or wealth management. Innovation is on the rise.
The FinTech revolution
Much of this innovation finds its roots in technological advances in peer-to-peer networking, cryptography, cloud computing, mobile apps, and big data analytics. Thousands of so-called “FinTech” startups are now offering innovative services and stealing market share from large banks, insurance companies, and payment processing firms. Often less constrained by regulation, more reactive, and able to design sleek customer interfaces, these startups have a real chance at changing profoundly how the financial system has structured our world for many decades.
Blockchain and the rise of cryptoeconomics
Innovations in the nascent field of “cryptoeconomics” are paving the way for a decentralized form of capitalism. Cryptoeconomics is about designing mechanisms and incentives to obtain desired properties in a decentralized network wherein digital or digitized goods are produced, distributed, and consumed. It lies at the crossroads of cryptography, economics, and game theory:
” Imagine, for a minute, that you want to create a digital currency that people will trust. For that to happen, among other things, it must be verifiably scarce—that is, users must be able to check that no one in the network has the power to “copy-paste” the digital files that represent units of currency to enrich themselves at the expense of others. To obtain this outcome, you will want to release open-source software that users can freely audit, to rely on strong cryptography to prevent theft of mobile wallets, and to design mechanisms to ensure that users cannot spend forged units of currency. Thus, after reverse-engineering the problem starting from the desired outcome, it becomes possible to decide which initial features should be core to the system. This is, in fact, how anonymous developer(s) came up with bitcoin—both the first real-world application of blockchain technology and the first successful implementation of cryptoeconomic thinking, aimed at creating the first decentralized, trustworthy digital currency ” (Vergne 2018)
Blockchain is one of the most significant technologies to impact business in recent years, opening up opportunities for exchange and collaboration. Web 3.0 is slated to be the new paradigm in web interaction, offering a decentralized environment and new avenues for data collection, storage and control, and privacy. Together they have the potential to disrupt some of the world’s large technology companies, such as Google, Facebook, and Apple.
And this is not just about new technology. Shifting social norms and expectations play an essential role in the emergence of what we could call crypto capitalism—a new age in history where transactions between people can be done seamlessly, digitally, securely and without the need for pre-existing trust, thanks to public-key cryptography.
An industrial revolution is underway. And it is one that has the potential to render many traditional organizations—from government agencies to business corporations—inefficient or redundant. How will the landscape change, in the financial sector and beyond? What will this new version of the Internet look like?
The Crypto Capitalism Center
It was created in 2014 at Western University’s Ivey Business School (Canada) to research the rise of financial technology with a special focus on blockchain applications and cryptoeconomics.
Our mission is threefold:
- Collect and analyze data to publish high-quality research papers that will provide a neutral and objective knowledge source on these topics
- Interact with entrepreneurs, incumbent firms and regulators to lead the discussion, inform policy makers and the general public
- Develop cutting-edge educational material for students and executives in order to build expertise in FinTech
The Crypto Capitalism Center is supported by the Ontario Government (Early Researcher Award) and the Social Sciences & Humanities Research Council. We’re on a mission to study one of the most exciting tranformations that our modern societies have ever experienced.