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Opinion | What decentralised finance can teach the world of business and geopolitics
- The crises stemming from the Covid-19 pandemic and Russia’s invasion of Ukraine show the world is sorely in need of greater resilience
- Balancing decentralisation with authority is becoming critical for success in new models of investment, business continuity and national security
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A global paradigm shift towards decentralisation is under way. What started in the world of finance is becoming increasingly relevant to how businesses become more resilient as well as to the broader world of geopolitics.
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With decentralisation comes resilience, a much-needed characteristic that avoids the danger of relying too much on single points of failure or control. The previously underground, alternative cryptocurrency world was among the first to embrace this new system, introducing the concept of decentralised finance.
Despite the many headlines of scams and meme coin mania, assets that are not controlled by nation states or banks are becoming more mainstream. At its core, decentralised finance celebrates the power of peer-to-peer transactions, lending and even algorithms determining a currency’s supply.
At their best, decentralised systems depend on the reliability of millions of geographically dispersed nodes across multiple routes that cannot be arbitrarily shut down. Value can then be transferred in automated ways. Even contracts are becoming “smart” in the sense that two or more parties can engage in transactions that are mediated by software rather than meeting to sign physical documents.
Major investment firms are taking this so seriously that Fidelity, which has more than US$4 trillion in assets under management, is allowing customers to deposit bitcoin into their retirement accounts. Major international exchanges offer spot and futures exchange-traded cryptocurrency funds.
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Lending and trading platforms outside the traditional finance sector are beginning to gain more traction. This is something traditional banks and brokerages have noticed with increasing alarm and interest.
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