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[Opinion] Will the financial system ever be completely decentralised?

December 5, 2022

In a recent interview at the Edufuturists podcast, Adam Roney, Calls9 Founder & CEO, was asked the question: Will the financial system ever be completely decentralised? This is a very interesting question that has a complex answer. Following is Adam's opinion about this matter, paraphrased from his interview. 

"I think the financial system will never be fully decentralised. Imagine all your savings being stored in a digital wallet on your phone or laptop. You would lose everything if that device got stolen. Currently, there is no consumer protection and no way of getting that back which is obviously an ultra-risky situation for people to be in, and it's completely unrealistic. I believe that most people don't want to be a bank from start to finish, but there are parts of the financial process that you should have more control over. 

So if I want to send you money, I'm not sure why I need many intermediaries to do that. The storage of finance versus the movement of cash is different. And, on the storage side, I think many people will retain a traditional bank account for various reasons. But still, the movement side can be fully decentralised. 

Web3 technologies can have an impact on the payments processing side as well. The big thing happening in the blockchain space at the moment is the development of what we call layer two solutions. Layer one is the actual blockchain itself, whether Ethereum or another. And there is a cost associated with transacting in a blockchain. It can sometimes be slow and also, there is a maximum transaction processing volume. Layer two solutions have come along to solve these issues and make it faster and cheaper. Essentially it will make it more convenient, but when you interact with layer two, you're not interacting with the main blockchain. So, that's not a fully decentralised solution anymore. It's a partially decentralised solution, and actually, in finance, we do this all the time. 

For example, when we are out and about, and I want to pay for something, the layer one equivalent of you paying for it is going to the bank, pulling the money out, and giving it to the bartender. Sometimes you do that, but sometimes it's not convenient. The layer two solution is to hand over a credit card. The credit card makes it more convenient, but it isn't your actual bank, and it isn’t your money. A whole process happens to reconcile your bank account to your credit card, but you use it because it's convenient. 

So, what will happen with Web3 is that the core tech will always be decentralised, but there will be these convenience layers that get put on top to make it easier, faster, and cheaper to interact with the chain. From my perspective, as long as they're done correctly, I think that's okay. Blockchain purists would not be happy about this, but it's a pragmatic solution to a very real-world problem. 

To give you an example, Ethereum 1.0 could only process 14 transactions a second globally. After Ethereum Merge, which upgraded it, it can process a hundred thousand transactions a second. So it's significantly faster than before, but it still is nowhere compared to the number of transactions Visa or Mastercard is processing per second. It's light-years away. 

But, it will evolve, and I believe it will be a hybrid world with some centralisation and some decentralisation."

Watch the full podcast.

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