The Future of the Global Financial System

Transcript

Pittsburgh also from rmit age thank you so much for having us I'm going to talk about a teacher with the financial system but what I'm actually going to do is I'm going to sort of show you the way both Jason and I have been sort of struggling with understanding why crypto is so interesting I've been doing this for about nine years 2013 and and throughout that that period I like trans people you know crypto is interesting we know blockchain is

existing we know it's important what we're going to try to do what Jason has done what I'm going to try to do today I'm trying to try to explain why we currently here than it is and this is going to be my argument now uh a lot of my team blockchain Innovation Hub we've been publishing lots of things Jason was talking about the institutional crypto economics model of blockchain technology that we published a couple of years ago we've done lots of things I've got to make that here that I wrote quite a few years ago trying to compare blockchain technology to ancient Titania I'm not sure if there's I'm not sure that paper really works but it's very funny um I think what we've been doing is trying to understand blockchain from as many economic angles social science angles as

possible then come to a conclusion about that again why is it important so today I'm going to present what I currently think is the answer to that question I'm going to start really with the actually a similar digital transformation that occurred that has occurred through my lifetime um between 1998 and 2014-ish something like that the internet fundamentally came for newspapers at this time I was actually writing a newspaper op-eds in Melbourne I was able to see this really close up and what happened in that period is that the bottom absolutely fell out of the media landscape the advertising that had backed up the

newspaper industry since the 19th century completely evaporated and went almost entirely digital this is the Australian advertising expenditure I've seen similar numbers about Vietnamese advertising expenditure but you can see from about 2003 something like that that online just takes off the print media advertising expenditure just collapses it was a fundamental revolution in the way that industry function itself the journalism industry is it is like it was when I was writing those orbits when um when I when I was senior politicians could just call the editor of a newspaper and get positive coverage

based on that the entire print media industry and the entire um uh political system changed as a result of this digital transformation the argument I'm going to paint here is that that happened about 20 years ago it started about 20 years ago but now finally with Krypton blockchain the internet is finally coming the finance now obviously digital technology has been a fundamental bond with the financial industry since since the 1980s even even earlier as well they were one of the first Industries to seriously start experimenting with computer with large-scale data management but it was a very incomplete

Revolution they were able to get the sort of communications that the digital technologies that Jason was talking about but they weren't able to do the really fundamental base digitization not just of the information about our sense the goal of the assets themselves and with cryptocurrency and blockchain Technology that's what we have finally managed to do we have managed to make it so that every single asset in the economy is becoming a truly digital asset now it's kind of hard for us to see in the cryptocurrency industry because of course we're not just very much on on New Classic disease a new positive assets

of assets that compete with traditional Financial assets like Bitcoin might be money and we're trying to build alternatives to the traditional financial asset system but I know in in Australia and around the world that all the major Financial companies [Music] ethereum and smart contract layers to build out traditional Financial assets into these purely digital assets themselves I mean what are those digital assets so for example we're talking about turning um fixed income products into digital

assets into digital assets all on Native crypto blockchains and on on platforms like ethereum as well this is not being widely advertised but in Australian world is like it must work every single major Bank every single major brokerage firm every single major take a platform okay digitalized assets on cryptocurrency long-term rails in order to take advantage of those the the things like instant settlement or Atomic settlements and smart contracts digital decentralized Finance or D5 platforms that we built in order to fundamentally

transform their products into their problems now I say that every asset is a digital asset but we in this room of course we know exactly what that means it reacted asset is a digital asset which means every digital asset is fundamentally just a smartphone every digital asset is a smart contract that details out like a traditional contract but online all the rules and rights that ownership of that asset allows the rules by which it might be transferred the rules by which you might exchange and borrow against it that's all built into the smart drugs they've done so are they fundamentally digital player if every asset is a smart

contract because what do we mean by smart contracts we mean that really every every smart contract is fundamentally just binary logic it's binary Logic on a computer this is this is what digital means why is that important so so we all understand something we all we all work with computers every day every every uh nobody touches the binary logic but economists and computer scientists have been trying to understand for many decades now since the second world war what the fundamental unit of information is the fundamental unit of information is is binary logic it's in the word it's in digital it means just you know how can we uh whatever how can we reduce

information to its most core theoretical minimum constituent part binary logic ones and zeros if every asset is fundamentally being reduced to its core information through its theoretical minimum that is required to communicate with each child that's the revolution that's what I think that we have changed now of course we did this with the newspaper we we managed to take use information we managed to take all my old opinion pieces if you managed to take the journal article Jackson die and begin in a moment and Ben we we ride at the work and we managed to communicate with each

other using binary logic and we managed to do so for now a very long time that revolution in journalism was his now I'm 20 years old but we couldn't do so for finance and we couldn't do so for finance for a really basic problem that we didn't have the blockchain technology we knew how to reduce information about assets to their constituent Parts but we didn't know how you could add that trust layer how the assets themselves could be digital not just the information about assets but the assets themselves are now fundamentally digital um digital units digital units

and recomposed and so forth and that's how we get to not just D5 but that's how we get to a truly digital Financial system when we've got information about assets possibly trust the layer plus consensus over what those assets and those rules actually are that's how a bill was really digital Financial system and throw it to that truly digital economy [Music] it's wonderful to build digital assets I love digital assets I think the fundamental point about digital assets that have been built through defy nfts

built on lockdowns is this basic idea of composability it's the idea that we can take any asset where the reader is a a piece of art in the case of entities whether it's a fixed income product whether it's cryptocurrency whether it's money whether it's um a mortgage-backed security and we can compose it with each other we can take that asset and we can put it into a pool of other assets that relate to nothing other that have no other relation but they are composable that they are digital and holding to simple basic standards I can't actually see them from here

how long ago five minutes okay there's a time signature but it's right behind the box um I think that's basically what's interesting about digital assets that they compose for now I should point out though all the assets in the economy aren't composable it's just it's very expensive to do so you have to hire a lot of lawyers I can make any asset I own composable if I call enough boys if I call enough people in suits to write contracts so that I can borrow against the assets that I hold but crypto is basically reduced this cost through all contracts to basically zero every asset is fundamentally proposable because

every asset is a fundamental but you know what is composed building matter I want to make a really simple Point here composer definitely matter because it's composability that gives us innovation in fact this is some of Jason's researchers on my colleague Darcy Allen's research where do ideas where does innovation come from it comes from the mixing and matching of different ideas different asset classes different entrepreneurial energies in the division of the world that we have about where this Innovation come from isn't the lone genius sitting in their room or the loan asset manager just managing a particular type of class of digital assets it's multiple assets

multiple ideas mixing and matching together that's where we get Innovation from that's why composability matters and obviously what is innovation matters it could be just fundamentally there's nothing else it is only through Innovation that we get economic growth prosperity and human flourishing that that is my answer to the question of why blockchain and cryptocurrency is interesting it's taking me a very long time to get here but it's because we've managed to reduce assets and financial building block of the economy into that core the the most basic constituent Parts who managed to take Financial assets we've made the

composable we've brought them to the absolute limit of composability and through that we get a step change in economic growth and prosperity that's me I'm from the Volcan Innovation home like Jason like me um uh please visit our website and thank you so much thank you so much