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The Next Industrial Revolution Is Already Here: It’s Called DeFi

Published Jun 21, 2021 11:14AM ET Updated Jun 21, 2021 11:30AM ET
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The Next Industrial Revolution Is Already Here: It’s Called DeFi

If history teaches anything, it's the difficulty of spotting paradigm shifts as they occur; likewise most people have never heard of “decentralized finance,” let alone how it's poised to change the world forever.

The Industrial Revolution
Two hundred years ago, the utilization of coal and steel powered a tectonic shift in how society organized itself. Mass production and its promise of productivity centralized cities and gave rise to a new class of wealth and power.

Most famously, Carnegie, Rockefeller and other so called “robber barons” amassed never before seen quantities of wealth by placing themselves at the center of industries that would go on to become cornerstones of modern life.

Today, the undercurrents of innovation point to a similar transformation, but ironically this time, in an equal but opposite direction. Instead of centralizing wealth and power, blockchain and decentralized finance (DeFi) are going to decentralize them.

Centralized Finance
In the old days, productivity was synonymous with manufacturing; but today, for better or worse, the engine of productivity is set up very differently, with finance at its center. Capital is king, and those employed to use it hold the keys to the economy. The effective usage of money, banking, credit, and investments powered the white-collar boom that followed World War Two and peaked just before the decadence of the real estate crash. Ten years later, as the world continues to grapple with the aftermath of financial greed and corruption, the question remains: Is centralized finance fit to predominate the economic landscape?

Looking at the numbers in 2019, Deloitte’s analysis of GDP found that Wall Street is responsible for a staggering 21% of American national income - which admittedly seems very impressive. However, by examining the growing proportion of financial fees (profits, wages, salary and bonuses) enjoyed by money managers, economists have revealed that while the current financial system does indeed contribute value, it also parasitizes it.

Since the early 1900s, the unit cost of financial intermediation was relatively stable, balancing between 1.3% and 2.3%. But since the 1970s, industry unit costs have rampantly trended upwards. In terms of value added this raises eyebrows; put simply, while the financial system offers the same services as it did one-hundred years ago, now it does so at the expense of much more money. Given the advantages of technology and its higher efficiency, it is clear that intermediaries today are skimming even more off the top than the growing unit costs indicate.

In a conversation with The Century Foundation, Alan Blinder called this phenomenon “financialization;” and it refers to “the growing scale, profitability and deregulation of the financial sector relative to the ‘real economy.’” Beyond being more expensive, according to The Century Foundation, it is also responsible for fueling overgrowth of the banks, while allowing them to become more speculative and opaque.

For a long time, the general public has been generally powerless in stopping the centralizing forces of finance interwoven with politics; but finally, now a solution emerges.

DeFi: The Decentralized Revolution
Nothing spurs innovation like great need, and the need for decentralized finance has never been greater. Blockchain technology paired with smart contracts have effectively introduced an alternative to institutional solutions. Instead of being forced to trust self-interested middlemen, now investors have access to fully secure and trustless decentralized protocols. For the first time ever, money can now be lent, borrowed, invested, and exchanged with complete security and self-directed autonomy.

Jason Blick, CEO of EQIBank - a pioneer at the intersection of DeFi and CeFi- said: “DeFi may become the single greatest catalyst for the Fourth Industrial Revolution. From income inequality to stabilizing global financial markets, DeFi technology will play a key role in delivering solutions to many of the challenges our world faces today. The rapid rise in Defi technologies demonstrate the rapid pace of human innovation and offer a glimpse into what a sustainable, decentralized financial future will look like.”

Blick’s comparison to the industrial revolution speaks to the core of blockchain’s promise. DeFi will change finance to the same degree that previous technological revolutions forever changed production. Echoing the exact same sentiment, Wall Street veteran Jim Bianco maintains: “DeFi could disrupt the current financial system the way ride-sharing companies disrupted taxi companies or the internet disrupted newspapers, or e-commerce disrupted retailing.” The list goes on; inevitably, DeFi will go down in history as this century’s most revolutionary innovation.

Beyond the fundamentals, DeFi has exciting implications for global social and economic systems. It will totally restructure society, distributing centralized influence to the masses. Jason Blick explains: “The DeFi Revolution is about more than just technology-driven change; it is an opportunity to help people from all income groups and countries, to couple converging technologies in order to create a financially inclusive, stable and secure future.”

EQIBank Introduces EQIFI
As this new future takes shape, only those forward-thinking enough to embrace it will enjoy the benefits of its disruption. With this in mind, EQIBank is powering EQIFI, a decentralized suite of financial products that will further expand DeFi’s current utility. This marks a historic milestone in DeFi’s history. For the first time ever, an officially licenced and regulated global bank is lending it's infrastructure to the DeFi ecosystem. The dual benefit of this goes two ways. For DeFi, it means a giant step towards mass adoption. EQIBank’s loans, custody, debit and credit cards, OTC, and wealth management tools will be made more accessible and integrated into the decentralized economy.

For the retail market on the other hand, EQIFI represents a bridge, one that makes the complexity of DeFi simple and accessible. EQIFi will introduce seamless cross-platform transactions to the mass market, therefore solidifying itself at the center of the decentralized revolution.

As Blick concludes, “banking is dead. Long live banking.” We’re certainly heading into interesting times for the sector.

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The Next Industrial Revolution Is Already Here: It’s Called DeFi

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Comments (1)
Mansoor Ahmed
Mansoor Ahmed Jul 29, 2021 9:54AM ET
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This is very well written article. I like it very much, Thanks for sharing.
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