I'm Still Betting on Blockchain to Improve Economic Opportunity

"I believe this technology should democratize access to the financial system."

AccessTimeIconMay 9, 2020 at 7:00 p.m. UTC
Updated Sep 14, 2021 at 8:39 a.m. UTC
AccessTimeIconMay 9, 2020 at 7:00 p.m. UTCUpdated Sep 14, 2021 at 8:39 a.m. UTC
AccessTimeIconMay 9, 2020 at 7:00 p.m. UTCUpdated Sep 14, 2021 at 8:39 a.m. UTC

Jed McCaleb is co-founder and Chief Architect of the Stellar Development Foundation, an open network that connects the world’s financial infrastructure.

When I started working in this industry, I was motivated by the idea that I could help build something to tangibly make people’s lives better. I could build a network that connected financial systems in a way that would be useful for the world. Because despite the advancements that technology and the internet have brought us, the global payment landscape hasn’t kept pace. At its best, today’s system is slow, cumbersome, and fraught with fees. At its worst, it leaves millions of people marginalized. A decentralized system could be a way to empower people with greater access to financial services that are fast and affordable. 

Jed McCaleb is a speaker at Consensus: Distributed, CoinDesk's free virtual convention running May 11-15. Register here.

I was clear-eyed that the kind of systemic change I envisioned would take time. Challenging the existing financial providers to see the value in connecting to decentralized infrastructure, educating policymakers and regulators about the benefits of this new technology, and then actually building a network with businesses that demonstrates valuable network effects, is a monumental challenge. 

Today, we’re at an important moment for this industry. While China launches a national blockchain platform, others in the world are slowly tapping into the potential this technology has to offer. But the last few weeks and months have acutely demonstrated how useful – and arguably necessary – this technology is. Holes in the system have been visibly exposed as people suddenly find themselves urgently needing to send money or financial support to family and friends all over the world. Even governments, like in the United States, realize that they lack the infrastructure to quickly issue payments to millions of citizens in need. It’s a reminder that the opportunity for blockchains to create a better, more efficient system is worth fighting for. 

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Like the internet democratized access to information, I believe this technology should democratize access to the financial system.
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As I prepare to take the virtual stage at Consensus: Distributed to talk about the evolution of cryptocurrencies, I thought about the fact that, while a lot has changed in the decade I’ve worked on this technology, the core ideas that make this technology compelling remain constant. 

Here is why I think blockchains are (still) the answer to how we build a more dependable, accessible and connected world.  

It promotes interoperability and inclusion

A blockchain allows seemingly disparate systems to connect even though they don't have a formal relationship with each other. While this might not sound very exciting, the socioeconomic impact is enormous. Because this connection means a world with over 180+ different monetary systems could work together on a single platform. That represents billions of people in the world being able to seamlessly transact and interact.

That’s a huge improvement over today’s system, which is essentially patch-worked together. Of the hundreds of different monetary systems, each has its own unique set of services and connections to the parallel systems outsides its borders. All of these disparate banks, money transfer operators, and treasuries combine to make up the entire global financial system as we know it. 

But imagine a world where you had almost instant access to carry, spend, or send a digital dollar, a digital yuan, a digital peso, any currency in your wallet, no matter the geographical location of your bank. Blockchain technology enables that speed and access, allowing systems to be interoperable and connected. When that happens, it creates access, opening the door to financial inclusion for so many who are marginalized today. 

Decentralization creates opportunity

As more financial institutions, companies, and developers come onto a blockchain network, it creates opportunity by leveraging the benefits of decentralization to create compelling network effects. The total power as a stable, secure, transparent network grows. 

Stable because the network persists and synchronizes regularly because it is spread over servers and computers all over the world. It doesn’t rely on a central server so a truly decentralized network can’t be turned off. Secure because no one can change the numbers or manipulate the data to their liking. Transparent because everyone can see the ledger and trust the information is correct. 

And maybe most importantly, unlike a centralized system with a predictable growth curve which can compromise relationships to users and their data, decentralized systems can grow organically, permissionless-ly, and  exponentially. It takes time to build network effects (as I’ve witnessed first hand over years in the industry) but once it takes off, the opportunity will be endless. 

Consensus can be sustainable

There are different flavors of the consensus algorithms used to maintain a blockchain and this means the speed, cost, and functionality on different blockchain networks varies. I feel strongly that the best way to build an interoperable, decentralized network is through an open-source protocol that’s sustainable. Much like the internet democratized access to information, I believe this technology should democratize access to the financial system. Open source will let us do that, because the network as a protocol isn’t driven by profits or shareholders. And, importantly, there are consensus protocols, like the one we’ve built for the Stellar network, that don’t demand huge energy resources to run. The Stellar Consensus Protocol is sustainable, using a small amount of energy. 

When blockchain development is led in this way, it enables even greater functionality on a network. We can build it in a way that’s best for the network and for users. That means we can focus on the improvements needed for today’s financial system to make it more equitable and accessible, like making transfers take seconds, rather than days, and cost fractions of a cent, rather than ranging from a few to hundreds of dollars.

I’ve devoted the better part of a decade to building blockchain technology. While we’ve made tremendous progress, as we face today’s crisis, it’s clear we still have a ways to go. Now more than ever, I am motivated by the utility and power of blockchains. For me and our work at the Stellar Development Foundation, blockchains are still the answer to a better, more equitable financial system.


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