As cryptocurrency moves into the public spotlight, more and more people are beginning to wonder what blockchain technology is all about. There are many resources that help educate new users about the basics of blocks and mining, different blockchains and cryptocurrencies, and how to download a wallet and get started. But there are fewer resources explaining a more important question that is beginning to surface: why? What’s the point of using magic internet money? What’s wrong with the money we’re using already? What does decentralization mean? And most importantly, crypto enthusiasts often claim that crypto is the common person’s tool to fight back against the established powers. So, how is that even possible?
I interviewed Steven Boykey Sidley and Simon Dingle about their new book, Beyond Bitcoin: Decentralised Finance And The End Of Banks, which describes the inevitable decline of centralized banks in the future of decentralized finance, or DeFi. When trustless, automated systems that allow everyone secure access begins to take over as the primary tool of transaction, there simply will no longer be a use for banks.
A little about the authors, Steven has worked extensively in technology and finance and is an award-winning novelist, playwright, and columnist. An American citizen, he currently lives in Johannesburg with his wife and their two children. Steven possesses an MSc in Computer Science from UCLA and is currently a partner with Bridge Capital.
Simon has been working with cryptocurrency since 2011 and has founded multiple fintech firms. His career spans broadcasting, journalism, design, product management, and investing, all with a focus on information science, finance, and open source technologies. He is currently the chief of Venox Digital Assets which operates exclusively within the Defi space. Simon has been on the founding teams of several fintech firms, founded cryptocurrency exchange Luno, and opened banking provider Curve.
1. Why is Beyond Bitcoin needed for those new to cryptocurrency and Defi?
Steven Sidley: There is a gap in the market. Most people are only aware of headlines and perhaps have read a few articles. On the other side, there are deep tech and crypto aficionados who speak an impenetrable language. The book takes the intellectually curious layperson by the hand and walks them through the entire space, the history, the big innovations, the people and the projects, how they work, who will benefit, and why the banks cannot compete. We have tried to make it fun, informative, and sharply to the point.
2. Are you serious when you say “the end of banks”? How soon do you think this will take place on a large scale?
Steven Sidley: It is “the end of banks” in the metaphorical sense, like the ‘90s Francis Fukuyama book named, “The End of History”. It means that traditional institutions will have to re-invent themselves or watch as billions get sucked into this far more efficient, inexpensive, and fairer ecosystem. It has already started. Trillions have left the traditional domain of central and commercial banks, and many hundreds of billions into pure DeFi projects. Loan and borrow, exchanges, yield farms, etcetera.
3. What are the immediate difficulties concerning the growth of DeFi?
Steven Sidley: The three biggest challenges are regulatory headwinds, which are beginning to subside, risk of scams and hacks, and ease-of-use because DeFi is complex and gnarly to wrestle. But remember, this entire industry is about a second old, relatively speaking. It is quickly maturing.
4. The book is distributed quite widely. What can DeFi do for those in poorer regions? Are the benefits only felt by those with money?
Steven Sidley: One of the major problems with TradFi is that not everyone is treated the same. Some people are entirely excluded, such as those without credit, documents, or education. Some are treated better, such as those with a lot of money to move through the system. DeFi is completely flat. Whether you have 50 dollars or 50 million, you can participate without permission and have access to identical services and rates of return.
5. How long did it take you and Simon to write the book, and what sources did you draw from?
Steven Sidley: It was approximately one year from concept to the printed book. Myriad sources, books, YouTube videos, podcasts, blogs, Twitter, Telegram, news outlets. There are endless resources. It took a while to separate the chalk from the cheese. This turned out to be a large task. The sources were in the thousands, but the main ones are listed at the end of the book.
6. The end of banks entails the end of central banks and possibly the end of nation-states as we know them. Do you see new systems of administration alongside new financial institutions?
Steven Sidley: Yes, but that is a much longer-term vision. It is not likely the nation-states or central banks or corporations will buckle and disappear under the onslaught of DeFi, NFTs, DAOs, etcetera. They have been around for millennia. But they will have company. DAOs will certainly challenge the governance space and NFTs the ownership space. And of course, DeFi in the financial services space. And the central bank will have to learn to co-exist with stablecoins.
7. Ethereum suffers from high gas fees. Do you see DeFi applications using other smart contract environments in the future? If so, which ones?
Steven Sidley: There are lots of challengers. Solana, Cardano, Cosmos, Polygon, Artbitrum, Algorand, Fantom, Polkadot, etcetera. They have all built interesting mousetraps at Layer 1 or Layer 2. But few can survive. Ethereum is migrating to a lower energy architecture, proof of stake, and then will address transaction speed and gas fees. Most, but not all, of the challengers will disappear. There is simply no room for all, even if their mousetraps are better. Ethereum has by far the largest developer ecosystem and some of the smartest people around. My money remains on them.