Does democratisation exist in the Fintech industry?

What we can learn from Bitcoin about Democracy in trade and ownership

Democratisation is a bit of buzzword at the moment. Especially in the startup space. It’s one of the those reliable expressions that is geared towards sparking the intrigue of investors and industries.

In fact, when it comes to buzzwords, democratisation is right up there with ‘disruptive’… these days, every new venture is ‘disruptive’. Innovative just doesn’t quite stir the juices of investment anymore.

Oh, and let’s not forget ‘freemium’…

Every investor loves a ‘Freemium app with the ability to disrupt the [insert market] by democratising access to [insert service] using the Internet of things’…

Pitch complete. I accept investment in cash, credit and wire transfers.

What is democratisation anyway?

But in all seriousness, Democratisation has become the defining term that is used to describe the Web 2.0 to Web 3.0 transition that we are currently find ourselves traversing. Let’s call it Web 2.5. Like any buzzword, it’s oft overused. In fact, many times all that is being democratised is the element of the market the entrepreneur is willing to relinquish, and not the actual ownership of the market.

Take Uber for instance. I love what Uber has done to facilitate peer to peer transacting between cab drivers and users. I spoke about how significant their software has been in an earlier article, however, what they have done falls somewhat short of ‘democratisation’ in my opinion.

I myself, have been guilty of ‘selling’ democratisation of a service myself, so this doesn’t come from a place of moral superiority in any way.

I’m in love the concept of democratisation, I love it’s virality (oops, another buzzword). I fundamentally believe that value for users comes from creating structures where they interact with one another peer to peer (yikes), and I adore the use of AI to level the playing fields of previously monopolised markets. But my version of democratisation is essentially providing improvements on distribution within a market whilst making sure we retain enough proprietary ‘control’ to profit from the enterprise.

So as a capitalist and an entrepreneur, my ideals collide with the purest nature of democracy. It is at this point that myself, and most other startup founders who preach democratisation actually depart somewhat from it’s core values.

Bitcoin, however, does not. Bitcoin represents true democratisation.

So how does Bitcoin do this?

Anonymity from the top down

Without giving an exhaustive history of Bitcoin, the very fact that it’s creator, Satoshi Nakamoto (who could have made himself the richest and most influential tech demi-deity of our generation) remains anonymous is testament of the mission and core belief of this open source trailblazer.

This anonymity is a core element of the democratised nature of Bitcoin. Unlike any other modern currency (called FIAT currency in Crypto world), all of which require the banks (who act as intermediaries and distributors of your monies) to hold your most intimate personal details on file for various levels of validation and verification; to open a Bitcoin account (or address), all you need is an internet connection.

True democracy, should be anonymous. Anything other than total anonymity promotes bias and coercion (hence the reason in a ‘democracy’ we have voter anonymity).

So when good old Satoshi Nakamoto designed Bitcoin to be totally anonymous (optionally), it was no mistake or happenstance.

Decentralisation is key to democratisation

Further to anonymity, Decentralisation is intrinsically linked with the ideals of democratisation. In actuality, it should be the staple of whether something should be classified as democratised or not. After all, democratisation is about the true distribution of power and influence more than anything.

Without going into too much detail, which is beyond the scope of this article, the bitcoin network is maintained by users and miners. For more detail about how these ‘nodes’ within the network actually work, you can read this article. Suffice to say at this point, in the World of Bitcoin, the community, quite literally own the network.

In this manner, Bitcoin was designed, from the ground up to have no central authority. This is social ownership at its purest.

Bitcoin is literally, the most democratic system of governance on the Internet. Decentralisation protects this democratisation by ensuring that ownership, growth, profit and development all remain fairly distributed across the network, rather than amassing in the pockets of an authority or owner. It birthed what we know as blockchain technology, and is now being used by developers in all kinds of new and exciting areas.

Open Source and Loyalty

There is some confusion in regards to exactly what Open Source means. I have a friend, who is a long term investor in Bitcoin, who is convinced that Satoshi has implanted some ‘hidden code’ that will cause Bitcoin to implode on itself once it becomes the sole currency of exchange in the world! I’ve tried my best to explain that in an ‘Open Source’ program, if this code existing, we would have found it by now, but to no avail.

Anyway, in addition to being decentralised and anonymous, Bitcoin, also allows anyone (who cares to investigate) know exactly how it works. This is called Open Source technology. Bitcoin is by no means the inventor or even an early adopter of Open Source programming. Open source software has been around for as long as software itself.

The code for Bitcoin itself is not very large at all, a few dozen files make up the entire protocol. It is this open source nature that creates the trust that drives people to join the community. By placing the core in plain sight, a high degree of certainty can be placed on the network, without an irrational fear of ulterior motives that come with ownership and proprietary code.

This is one true advantage of a truly democratised system, people actually choose to protect it, because of the trust and ownership they have been bestowed with. Consider the current privatised, centralised and closed landscape. All of the leading tech companies, like Google, Facebook, Uber, Amazon, etc. as fantastic as they are do not inspire the loyalty of their community of users. Contrary to this, they are required to become monolithic and monopolistic in order to maintain growth and influence. Users stay with them because the alternative normally requires too much compromise to their current position, but if a true alternative showed itself, that was more respectful of their democratic rights, you better believe there would be a cataclysmic exodus of biblical proportions.

Bitcoin on the other hand, evolves with it’s users. They stay loyal in the face of the rash of centralised alternatives that are flooding the cryptocurrency space because they view it as their currency, and they know they’re not being lied to because every element of it is open and public.

Can modern fintech companies take on true democratisation?

So with all that being said, is their room for truly democratised innovation in industry, or is this kind of change just a muted form of 21st century digital Marxism.

Well, contrary to the thoughts of many, I genuinely believe in the potential for democratisation to revolutionise the fintech world as an unmissable opportunity. Decentralisation has already begun to form a strong footing with companies like Golem, filecoin and Siacoin in the provision of decentralised cloud services to the masses. They are still privatised economies though, so only half the way there. How about a democratised open source file hosting system, where the ‘payment’ is a reciprocal service agreement, that is you are given file space and bandwidth in line with the space and bandwidth that you provide. If you want extra space and bandwidth, your payments are distributed directly and evenly to the nodes providing you with cloud support in realtime. But this is just the beginning.

Consider the potential of a democratised Uber, in which there is no central company, but rather drivers bid in order to win the vacant cabbing opportunity. Without the central authority, all of the proceeds of the transaction go to the driver, executed via a smart contract once both driver and user confirm the journey is completed, with a tiny transaction fee being paid to the nodes that provide the server power for the business to operate. On top of that, the system learns to set recommended rates based on the buy/sell spread, similar to an exchange. If you’re not in a rush, you can set a low bid and wait for someone to accept it. If you need a drive, like NOW, you set a high bid and your lift arrives in 2 mins. Fair value proposition, and perfect peer to peer trade.

The Profit Dilemma

The applications for truly democratised applications in fintech is endless. It’s actually a fun little exercise to take your favourite fintech company and imagine what it would look like with a democratised model. The issue, however, doesn’t lie with imagination, but profit (or the lack of it).

If no one profits, why would anyone do the work to set these systems up? I don’t know, ask Satoshi.

But if there are those out there who can dare to be visionary, and can see the ‘value’ in creating non-profit systems that contribute a communal wealth, well in that case we all will be better off, surely.