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notes/fintech-incrementalism-and-responsible-innovation.md
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title: Fintech Incrementalism and Responsible Innovation title: Fintech Incrementalism and Responsible Innovation
created: 2022-04-04 created: 2022-04-04
date: 2022-04-04 date: 2022-04-04
description: "In episode #5 of our ongoing deep dive into web3 and crypto, Rufus Pollock and Stephen Diehl explore the claim that blockchain can be a vehicle for increase in financialization through the development of more complex, blockchain based financial products." description: "In episode #5 of our ongoing deep dive into web3 and crypto, Rufus Pollock and Stephen Diehl explore the claim that blockchain can be a vehicle for increase in financialization through the development of more complex, blockchain-based financial products."
youtube: https://www.youtube.com/watch?v=7rLQoTtwRSU&t=4s youtube: https://www.youtube.com/watch?v=7rLQoTtwRSU&t=4s
podcast: https://anchor.fm/life-itself/episodes/Fintech-Incrementalism-and-Responsible-Innovation-e1gn02u podcast: https://anchor.fm/life-itself/episodes/Fintech-Incrementalism-and-Responsible-Innovation-e1gn02u
featured: false featured: false
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In this episode, Rufus and Stephen explore an argument for blockchain and crypto that they term “fintech incrementalism”. In this episode, Rufus and Stephen explore an argument for blockchain and crypto that they term “fintech incrementalism”.
This position assumes the capitalist notion that greater [financialization](../claims/is-hyperfinancialization.md) is an engine for progress, and claims that blockchain can be a vehicle for this increase in financialization through the development of more complex, [blockchain](../concepts/blockchain.md) based [financial products](../concepts/financial-asset.md) – and the added market efficiency which will result. This ranges from better payment rails i.e. a better visa, stripe etc, to more efficient clearings systems, to full-scale innovation in financial engineering. This position assumes the capitalist notion that greater [financialization](../claims/is-hyperfinancialization.md) is an engine for progress, and claims that blockchain can be a vehicle for this increase in financialization through the development of more complex, [blockchain](../concepts/blockchain.md)-based [financial products](../concepts/financial-asset.md) – and the added market efficiency which will result. This ranges from better payment rails i.e. a better Visa, Stripe etc, to more efficient clearing systems, to full-scale innovation in financial engineering.
The political imaginaries of this position are more efficient markets and more bespoke and customized financial products to buy. [Capitalism](../concepts/capitalism.md) is net positive in the world, and a fairer, more efficient and transparent economy benefits everyone. The political imaginaries of this position are: more efficient markets and more bespoke and customized financial products to buy. [Capitalism](../concepts/capitalism.md) is net positive in the world, and a fairer, more efficient and transparent economy benefits everyone.
Rufus and Stephen 'steel man' the “fintech incrementalism” position, identifying 7 key claims, before then conducting an analysis of the position. Rufus and Stephen 'steel man' the “fintech incrementalism” position, identifying 7 key claims, before then conducting an analysis of the position.
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* Fintech innovation and quantitative finance has a good track record of progress in the last few decades. * Fintech innovation and quantitative finance has a good track record of progress in the last few decades.
* New York Fed’s open source models of the US economy * New York Fed’s open source models of the US economy
* GitHub - [FRBNY-DSGE/DSGE.jl: Solve and estimate Dynamic Stochastic General Equilibrium models (including the New York Fed DSGE)](https://github.com/FRBNY-DSGE/DSGE.jl) * GitHub - [FRBNY-DSGE/DSGE.jl: Solve and estimate Dynamic Stochastic General Equilibrium models (including the New York Fed DSGE)](https://github.com/FRBNY-DSGE/DSGE.jl)
* Low cost index funds * Low-cost index funds
* [Mechanism design](https://www.investopedia.com/terms/m/mechanism-design-theory.asp#:~:text=Mechanism%20design%20is%20a%20branch,self%2Dinterest%20and%20incomplete%20information.), [auction theory](https://en.wikipedia.org/wiki/Auction_theory) * [Mechanism design](https://www.investopedia.com/terms/m/mechanism-design-theory.asp#:~:text=Mechanism%20design%20is%20a%20branch,self%2Dinterest%20and%20incomplete%20information.), [auction theory](https://en.wikipedia.org/wiki/Auction_theory)
* [Myerson–Satterthwaite theorem](https://en.wikipedia.org/wiki/Myerson%E2%80%93Satterthwaite_theorem) * [Myerson–Satterthwaite theorem](https://en.wikipedia.org/wiki/Myerson%E2%80%93Satterthwaite_theorem)
* [Black-Scholes-Merton model](https://www.investopedia.com/terms/b/blackscholes.asp) * [Black-Scholes-Merton model](https://www.investopedia.com/terms/b/blackscholes.asp)
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* **Claim 1:** Everything is moving towards real-time and international finance. Crypto is the evolution of this trend. We want to move the entire economy into a hyperfinanicalized 24/7 real-time always-trading market with even more complexity and lower friction than what we have presently. * **Claim 1:** Everything is moving towards real-time and international finance. Crypto is the evolution of this trend. We want to move the entire economy into a hyperfinanicalized 24/7 real-time always-trading market with even more complexity and lower friction than what we have presently.
* Building a [T+0 settlement](https://www.investopedia.com/ask/answers/what-do-t1-t2-and-t3-mean/) system for equities is a great idea. Real-time settlements would be a boon for the liquidity of US capital markets. * Building a [T+0 settlement](https://www.investopedia.com/ask/answers/what-do-t1-t2-and-t3-mean/) system for equities is a great idea. Real-time settlements would be a boon for the liquidity of US capital markets.
* Real time payments are a resounding success in Europe and Asia. * Real-time payments are a resounding success in Europe and Asia.
* We’ve solved volatility problems of asset classes in the past. We’ll do it again. It just requires more math and more sophisticated models. * We’ve solved volatility problems of asset classes in the past. We’ll do it again. It just requires more math and more sophisticated models.
* **Claim 2:** Banks are outdated and slow to innovate: core banking software is mostly from the 1980s; state of bit rot in financial infrastructure is vast; American infrastructure is massively outdated. Crypto is the means to fix all this. * **Claim 2:** Banks are outdated and slow to innovate: core banking software is mostly from the 1980s; state of bit rot in financial infrastructure is vast; American infrastructure is massively outdated. Crypto is the means to fix all this.
* **Subclaim 2a)** Private money and [Central Bank Digital Currencies](../concepts/cbdc.md) will compete for market share and will coexist. This will be the future of finance. * **Subclaim 2a)** Private money and [Central Bank Digital Currencies](../concepts/cbdc.md) will compete for market share and will coexist. This will be the future of finance.