The way humans use finance is evolving and becoming more efficient
After the financial crisis in 2008, a new type of currency took birth and quickly got attention on the internet. This introduced the world to a kind of money with no centralized party to manage accounting and supply. Bitcoin quickly became a $10B digital currency within four years of its launch. This demonstrated the power of open-source, decentralized systems to the world for the first time. And this led a few more humans to explore the use of open-source systems more broadly.
With that exploration came the next most significant innovation in decentralized open-source systems — Ethereum. What does Ethereum mean to humans?
Let’s try to learn from our understanding of human evolution from scientific ways. Where is humanity going?
I will open up with a bold statement.
We are building a world for machines. These machines will be the evolved form of humans.
Evolution is a natural course for species. Species either wipe out or evolve with time. Biology tells us that the mixing of different genes via DNA leads to evolution. This genetic mixing leads to small unnoticeable changes to each individual. And small changes like these on a type of population across generations leads to the evolution of whole species.
You can imagine the human species being a parent entity and each human being a child entity. Then it would feel like the parent entity is evolving itself by making child entities evolve individually and making them coordinate better. Another way to think about it is by imagining each human as an individual consciousness and a group of humans as a collective consciousness.
Humans have an average lifecycle of ~79 years. This limits humans in many things they do or aspire to achieve. The next evolution for humans is increasing that lifecycle. The obvious possibility is having our consciousness survive for a more extended time as it accumulates knowledge over time. And consciousness is nothing but a sort of Artificial Intelligence. Consciousness continuously consumes information as input and produces output. In a sense, we already behave like AI. Touching, listening, breathing, watching, and reading are all types of information we consume as input. And any decision we make is our output like “I decided to write this piece.”
So the futuristic world would be a world full of individual consciousness. Each of these consciousness plays its part, and together build a collective consciousness. This collective consciousness plays for the greater good of the whole species. Like today we create many value systems to make sure we humans as a society survive and nurture.
In the long history of humankind (and animal kind, too), those who learned to collaborate and improvise most effectively have prevailed — Darwin
Machines will do everything better than us — Elon Musk
So a machinic world seems like the natural flow of human evolution. We already see smaller steps in that direction being played out. Like we have started investing heavily in artificial intelligence, augmented reality, and genetic coding.
Now let’s try to use this evolutionary trajectory to understand how finance would evolve in the following decades?
Assuming you are with me now when I say that, we are building a world for machines. How would a world of machines function financially?
Finance is a big part of human lives. Finance provides humans an efficient way to express themselves and coordinate with each other. Machines can coordinate more efficiently with each other if the information flows freely and openly between them. This includes financial information too.
Imagine yourself for a minute if you were living in a world full of machines. Which financial system would these machines use?
- a centralized financial system like what we have today, where the information is not available to each machine and some entities have more power of making decisions
- a decentralized financial system where information is available to each machine and the decision making is done by a collective process
Humans have progressed because of their coordination skills. Over time we have learned to work in larger and larger sets of groups. Machines will be much more efficient at coordinating. Machines will be able to work in much larger sets of groups than humans. Machines will be more aligned with their collective consciousness than we are today. And to be able to coordinate 2better, it seems natural that machines will have a trustless system. They would not need another set of parties to establish trust between them. Hence the finance would be more transparent and distributed.
Finance will evolve to be more open where anyone can innovate. The financial system would become transparent, and everyone will have access to the same information. And I believe Bitcoin and Ethereum are our first steps towards this evolution.
This article was an effort to set up a base for my next piece. Here I tried to use science to come up with a probabilistic conclusion for the evolution of finance.
In my next post, I have shared my thoughts on what application would accelerate this evolution. Click on the below link to read the post.
Thanks to Vijay Chetty, Prince Arora, Himanshu Yadav, Ryan Sean Adams, Joel John, Krishna Sriram, and Sumukh Shetty for their help with the draft.
About me:
I am co-founder and CEO at Mudrex (a Y Combinator backed company). Mudrex helps people invest in crypto in a risk-adjusted way. At mudrex professional traders create quant funds and let others invest in their funds. We have already helped thousands of people trade more than $0.5B.
