March 6, 2021

Facebook: Silicon Valley to conquer finance with 'blockchain' | Innovation


Blockchain causes furor in Silicon Valley. The decentralized technology, through cryptocurrencies and crypto-active, is considered as the next great wave of digital transformation of the financial world. A vision fully justified from the point of view of Silicon Valley, because in the same way that the open internet allowed them to create international leaders, now they hope to be able to lead the change of finances and money for a digital money or digital asset of the network . This new money constitutes one of the great pending tasks of the technological world together with the decentralized digital identity (self-sovereign identity or SSI in its English acronym).

In this sense, the recent announcement of the Libra consortium, led by Facebook and some of the most important technology companies and blockchain of the world, has opened the war between the companies of the XX century of the financial sector and the companies of the XXI century, led by the technological ones.

Libra also glimpses two ways of understanding that future decentralized world of finance from Silicon Valley. On the one hand the Facebook consortium will initially make use of DLT technology (distributed ledger technology) with the classic consortium model that has little to do with resistance to censorship They promote models like Bitcoin, but promises the evolution of the consortium to a totally open model similar to the main cryptocurrency in the future.

Other successful founders of Silicon Valley as Jack Dorsey, founder of Twitter and Square, bet fully on supporting open ecosystems such as bitcoin. Dorsey has created a unit called Square Crypto that reports directly to her and that aims to work exclusively in the development and support of the protocol, with an initial team of six people.

Why does Silicon Valley want to conquer the financial world through decentralization?

Simply because it can and because they consider that it is the natural next step to continue growing and consolidating the future technological world leaders. Previously, the world of telecommunications also tried to use technology to change the world of digital payments (note the presence of Vodafone and Iliad as members of Libra), but it was held back in many countries by the financial lobby.

A similar result is found in the world fintech and in their efforts to try to remake the rules of the game of finance with technology, also braked and sabotaged by the financial lobby in many countries.

However, the world blockchain Not only has it generated much success with your proposal, it has also sparked a worldwide interest in rethinking our relationship with money in a digital world. In this case, it does not seem that the tricks of the financial lobby have triumphed to point to it as an instrument of criminals with obscure interests.

All these movements have been opening increasingly the gap to decentralize finance with the use of technology, and Libra, along with bitcoin, is perhaps one of the most important events of the last 10 years.

The importance

The important thing about Libra is not its technology, because everything is to be done and the network will not be launched until 2020. The important thing about Libra is that it is an act of strength, power and will of some of the most important companies in the technological world has formalized a declaration of war on establishment financial. This declaration of war has been premeditated and very well prepared by Facebook and is caused by its own needs for growth and development.

This is reflected in some key aspects of the proposal of Facebook in its white paper. First it is remarkable that no there are banks as members (although Visa, Mastercard, PayPal, PayU and Stripe do), and we do not know if it is because they have not been invited or because they have not wanted to participate, but there are some of the main technology companies of the moment.

In addition, Libra is a stablecoin (the denomination in English for a cryptocurrency of low volatility referenced in many cases to the dollar) composed of a basket of low volatility assets (dollar, euro, pound and short-term debt) that could become in many countries with second-rate currencies as a preferred form of savings and payment.

And, finally, following the trends of the moment, aspires to become a network without permission (permisionless) from its current starting point with DLT.

All this is revolutionary and constitutes an act of strength and confidence in the technological world. Balaji Srinivasan, of Andreessen Horowitz (member of Libra and one of the most important venture capital companies in the world who has been betting for more than six years on the bitcoin world and blockchain) and ex CTO of Coinbase (member of Libra and one of the main cryptocurrency exchange houses in the world) explained his vision years ago to leave behind the classic power centers to promote technology power centers such as Silicon Valley.

Participating venture capital firms include some of the usual suspects of the bitcoin world and the cryptocurrencies. Pioneering investors such as Ribbit Capital or global references that defend Bitcoin such as Andreessen Horowitz or USV. From the world blockchain and cryptocoins are Coinbase, Anchorage, Bison Trails and Xapo. The Argentine Wences Casares, CEO of Xapo, which sold Patagon to Banco Santander in 2000 to become Openbank, is one of the most staunch supporters of bitcoin as native internet money.

Curiously, technology is perhaps the least relevant at this time in the bet of Facebook and its partners. The game must first pass through the lobbys that will try to influence and facilitate the way with politicians, regulators and public opinion. The future of Libra will be decided at that level because unlike bitcoin it is a model with clearly identified participants that can be censored and banned. But it is understood that Silicon Valley is confident that it does have that influence to win the game.

Will the world be better with the technological giants dominated the financial world too?

Probably not. Surely better in terms of usability and quality of service, but the key question is at what price? Silicon Valley and the technological world make an impeccable marketing of advancement, innovation and messages to improve the world. But it has been at the cost of creating global oligopolies that have left a large part of the mass of the world population dependent on these companies. What will happen if they also have power over part of the financial system? The main financial actors have abused their power and the trust placed in them, but if those actors change we have to know very well what the new rules of the game are.

We are already increasingly submerged in technological environments with totalitarian tendencies. If each time we are all more connected, but more alone, who directs our lives? Maybe they are the algorithm designers of these big companies?

In this game, as it has always been, there are no good or bad. But there is a power struggle for a prey that is you. That is why it is important to understand where exponential technologies take us.

The opportunity to differentiate ourselves in the Western world

The Chinese technological giants like Tencent (with WeChat) or Alibaba (AliPay) and other Chinese key players have already demonstrated what it is possible to do with technology to centrally change payments. Europe and the West have the opportunity to bet on technologies such as Bitcoin and many others that promote the privacy of people, the transparency of institutions and equal opportunities. If we become leaders in this type of technology we could have a real competitive differentiating and winning advantage.

What can we do?

People can open our horizons, explore new paths, embrace technological change, learn English if we do not know yet and if we have the opportunity emigrate professionally working remotely for companies that push for change in the world.

If our leaders and political leaders also take this path they will serve as a model for all. Hopefully, they will transmit to their middle managers that continuing to do things as they have always done will no longer work and that if their organizations want to survive they need to have more flat, meritocratic hierarchies and geared towards taking advantage of the change. The decision to be part of the winners or losers We take each one of us from the 21st century.

Alex Preukschat He is the coordinating author of the book 'Blockchain: The Industrial Revolution of the Internet' Ediciones Gestión 2000 (Grupo Planeta) and the graphic novel 'Bitcoin: the hunting of Satoshi Nakamoto'@BitcoinComic and coordinating node of BlockchainEspana.com.
With edition of Iñigo Molero

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