One of the parts I enjoy about diving into the infrastructure of Decentralized Finance, which my position within the Radix network allows me to do, is that I get to approach transactions of value in the way that a scientist might approach research.
This becomes important when you fundamentally believe that the underlying architecture for how finance works has become outdated.
Yesterday, for example, I was talking with Piers, the CEO of RDX Works who introduced me to the idea of a buying a coffee.
On the surface, it seems simple. You ask for the coffee and you pay for it with your credit card. There’s an exchange of value and you’re done, right?
Well, not so fast.
First of all, there’s all the mechanics of the actual payment. Visa needs to charge your account. They need to put a deposit in the merchants account. The database needs to be updated and the meta-information (date/time/location) needs to be recorded in both. Plus, there’s probably a tax implication somewhere.
But that’s just the easy stuff.
What else is happening to support this transaction?
- the amount of coffee in inventory has just been reduced
- the amount of soy milk (you got a latte) has been as well
- your loyalty points need to accrue to your account
- the store sales database needs to be updated
- the name of the barista who made your coffee and the cashier who rang it up needs to be recorded
- same for all of the meta information (date/time) about your purchase, so the company knows where you tend to purchase
- the espresso machine must increase (by 1) the number of coffees it has made, so it can be tracked for maintenance
- your customer lifetime value number goes up or down depending on your order
and there are probably 20 other things I am not thinking about.
The point is, when we exchange value with someone else, there’s a cascading impact for how that transaction rolls through the economy.
All of that…and I do mean all of that, will one day be automated (maybe not in my lifetime), but the financial infrastructure of the future is going to be able to handle that.
The simple reality is that today’s financial backbone is not capable of doing that because it’s based on a pre-digital paradigm (for the most part).
However, our economy is now a digital-first economy. We’re going to have a digital-first financial infrastructure to support it.