2020 Kidnapped Reality And Now We Are Dealing With A Changeling… How The DeFi Ecosystem Perfectly Explains What Comes Next.
As the events of 2020 continued to compound, most people’s day-to-day existence changed pretty dramatically. We were locked down, seeing very few folks IRL and experiencing most of our world through the internet and updates on television. Most that recount these hazy days in the present recall a few phases. Panic, concern, anger, confusion, vigilance, cognitive dissonance, paranoia, sadness — the situation was a weird burrito indeed. And this is how we arrived at a surreal moment. Everything happened at once, but somehow, nothing happened at all. And then, just as it came, this fog of Escher-like “logic” spread across a Dali-esque landscape seemed to dissipate. No matter your flavor of politics, no matter your age, no matter your class — most can agree the whole situation was bizarre. The tide of our day-t0-day reality receded and underneath it we found many sights that were hard to believe. Most interesting was, perhaps, that under the facade of commutes, bill deadlines, bus schedules, speed limits, and almost anything else that serves as the invisible connective tissue in a society, there really isn’t anything. There is no master plan. There is no single source of direction or information. There is no underlying fundament that suggests that anything must be a certain way. There is only the vestige of social pacts past, literally the last layer just before the current layer. There are growth rings that show us how we got to this precise moment. But they absolutely do not determine what is past this moment, for that is determined by what is happening right now. Future becomes present, present becomes past.
The Changeling
In times past, the folklore of many cultures described a scenario where loved ones could be kidnapped by fairies. In their place the fairies would deposit a strange creature, who by all accounts, would resemble almost identically the missing person. They walked, talked, and generally lived just like them. But those closest could tell that something was off. It was hard to pinpoint and even harder to prove, but something was just not right. These imposters were called “changelings.”
We now sit here with a reality that is a changeling. Things are just different, things have just changed. Whether people are recognizing it or not, change has come…it is here. You, dear reader, are witness to the biggest leap that humanity has taken in thousands of years. While it may be hard to pinpoint now, it soon will be obvious. As the present becomes the past and we move further and further away from the events of 2020, we will see that those 2020 events were only a catalyst. They were what governments and multinational businesses who are using the formulas and power structures of today thought would be inert. But there is a force that modern society has had a very hard time defining: The relationship between humans and capital. While this topic has been considered and wrestled with since the inception of capital systems, times have changed. Previously the participants within society that together form the economy were convinced and sold a narrative that the management of capital and the resulting outcomes of that management were somehow disconnected from their individual economic contributions and pursuits. Put another way, if you run a plumbing business, you are an entrepreneur, you are a plumber, but you are not a manager of capital….you are not a banker. This is a lie that has been perpetuated by bankers and financiers. The lie is walled off by jargon and over complicated explanations. After 2020, and as the economy begins to creak back to life, we can see this idea as simply untrue. What the old guard did not (I would argue could not) recognize was that the confluence of technology and financial markets in a capitalist system would eventually create a hydra so powerful that they could not contain it. The purpose of markets is to disseminate and process information. Technology pushes this possibility to an infinite bound of efficiency…..DeFi is a perfect example of the change afoot.
As economies became more complex, specialization occurred. This specialization was precisely what initially enabled efficiency in capital allocation and product flow. The grain folks had shipping folks, who had broker folks, who had bankers, who had capital allocators, who had investors, who had — you get the idea. One big perpetual motion machine of specialization. Of all these areas of specialization what is the one common element? Well, it’s capital of course. That is the life blood of any economy. So let’s say one wanted to assert as much control as possible, what do you suppose they would do? They would control the life blood. They would wield the skeleton key that is capital. I would suggest that there is a very real and understandable rationale to wanting and aggressively pursuing that control. Talk about a competitive advantage. But then things began to change. Whereas once one had to be standing with fancy credentials on the floor of a stock market to participate, now those participants can be middle school kids with an iPhone and some allowance money. In 1902 no one would have believed it possible. But it’s here. Technology is like water, given enough time, it carves a path through what seemed impenetrable. And technology has done it once again. This time through the mechanism that financiers have been pursuing in dark corners for decades. I am referring to the financialization of everything. Here’s the plot twist: Now that everything is a financial instrument, it just doesn’t make sense that a select few should be the gatekeepers. Technology agrees and now we have DeFi.
Nervous Gatekeepers
The punchline is actually pretty simple. Whereas those in finance used to be able to hide behind regulations and force feed products, rules, and policies that kept you from the value that you earn, now the old guard is faced with a stark new reality.
The very way that human beings create, save, spend, and guard their capital, the value to which they have access is being fundamentally reformatted. Through DeFi market participants and consumers are selecting the suite of products and services that they want to use. Market participants are rebuilding the world of finance through their choices and the allocation of their value in those choices. They are deciding what is best for them and they are pursuing the best option.
This is the power of DeFi…not some yield farming V1 45,000% APY project. Those are just the opening salvos. They need to be big to get attention…and they have. And now we design, build, experiment, and choose our financial future. Will this be easy? Of course not. You’d probably fight to maintain immense control over people if you had it too. That will happen. It will be interesting.
Let’s see how it goes down.
The economic reality before us is a changeling. While it’s hard to identify exactly what is different and maybe even harder to prove that something has changed…look a little deeper. You have the ability to control your financial world from the palm of your hand. That is what has changed. Now that you see that potential, that future, that power — what will you do next?
