Andreas Park: You believe the scaffolding is emerging for “a historic disruption to our financial infrastructure.” Please explain.
Campbell Harvey: The key characteristics of traditional centralized finance are familiar to all of us: central banks control the money supply; financial trading is largely done by intermediaries; and borrowing and lending are conducted through traditional banking institutions. Decentralized finance, or ‘DeFi,’ seeks to build and combine open-source financial building blocks into products that maximize value for users.
DeFi will cover everything from exchange to savings and lending. It’s also about ‘tokenization’ — which I am very excited about. Say you drop into your local Loblaws to grab some items for dinner. When the time comes to pay, you will have choices to make: Your eWallet might include Canadian dollars as well as tokens that are collateralized with, for example, gold or IBM stock. Maybe you want to pay with your gold token, but the store doesn’t accept those. Seamlessly (and without any intervention from you), your e-wallet finds a decentralized exchange and the best possible rate is determined to exchange your gold token for whatever the store prefers.
One thing that is getting a lot of media attention is ‘non-fungible tokens’ (NFTs), which are already transforming the world of art. Art is a space that has historically been plagued by very powerful middlepeople who have made it difficult for artists to make any money. With NFTs, artists can go directly to the people who enjoy the art. This will be transformational for many industries, I believe, including gaming, ticketing, legal documents, domain names and even fashion.
We have come full circle, because market exchanges started out with barter, and what
