FinTech: How to Change Existing Power Structures

On Day 3 of re:publica TEN, Stage 8 played host to the FinTech (Financial Tech) track. The participants had the chance to learn about topics like Bitcoin and Blockchain, as well as to gain an overall better understanding of how the application of technology in the financial sector is changing existing power structures.

The track formally opened with a talk from Elias Haase and Jaya Klara Brekke on “The blockchain: a crash course and challenging consensus”. Aimed at giving complete newcomers to the blockchain a basic understanding of what it's about and why it's a big deal, the two focused their talk on four main areas: a technical introduction to the blockchain, the key players in the blockchain arena, smart contracts and decentralised autonomous organisations, and the social and ethical implications of the blockchain.

One of the key innovations underpinning the fin(ancial) part of FinTech is crowdfunding, whereby the public can fund projects they perceive as having value, bypassing traditional investment models. In his talk “Using crowdfunding data to predict venture capital investments and city innovation”, Jermain Kaminski looked at whether trends in crowdfunding can suggest where venture capital investments will head next. Based on his research, there does indeed seem to be a connection between the two, with venture capital investments tending to follow heightened interest in crowdfunding campaigns some four to six months after the initial buzz. Moreover, looking at which projects are successful in which cities can also offer insights into what the residents of specific cities value as well as provide a way of measuring a city's “creative capacity”.

Can a monkey play the stock market better than a human? In the 1970s, American finance professor Burton Malkiel claimed that a monkey randomly selecting stocks would earn as much money from the portfolio as a professional investor carefully choosing investments. Florian Schweitzer took this question and modernised it, as explained in his talk “Der Affe des Herrn Malkiel” (“Mr Malkiel's Monkey”). Schweitzer created an automated computer program that trades shares on a Bitcoin-based market, generating more than a million euros in turnover on a monthly basis. But more use of robots and automated trading in financial markets comes with serious risks, such as increased risk of close cooperation (and thus corruption) between those who write the programs and major market players, as well as the potential robots would have to destabilise financial markets through sudden, coordinated actions.

Money exchanges with no banks, companies run with no managers, countries with no politicians ... It sounds like a futurist fantasy, Shermin Voshgmir admitted in her talk on “Blockchain, Smart Contracts & The Future of Democracy”, but as the capabilities of the Blockchain are further explored and developed, these fantasies are surprisingly close to becoming reality (indeed, money exchanges with no banks is already happening thanks to Bitcoin and other cryptocurrencies). A key aspect of the Blockchain is its decentralisation: two individuals can transact between themselves without the need of a third party with some central repository (that is, a bank with data stored on its servers) to facilitate it. It rewrites the trust models that have traditionally underpinned interactions in the last few centuries: instead of trusting a central institution that they will make sure both sides of an agreement are upheld, people can instead trust the Blockchain protocol itself and decentralised network that comes with it. But the Blockchain is still a developing technology that can be changed and designed to fit the needs of the people making use of it. This will present a central question for the next several years: How do we want to define the algorithms that make up the Blockchain that might themselves form a part of our future constitutions and societies?

Building further on this discussion of how the Blockchain might revolutionise democracy and democratic participation, “Blockchain and the future of governance. Let’s overcome the hype and understand what can be done” featured a conversation between Blockchain experts Shermin Voshgmir and Vinay Gupta and the two panel moderators, Boris Moshkovits and Andrea Bauer. Rather than focusing on the technology behind the Blockchain, the conversation centred around the implementation of this technology in society. For example, the Blockchain could be used to implement a system of global governance. Imagine a future where people all over the world can vote in favour or against certain policies using their individual, verified identities on the Blockchain. Pressure could then be put on national governments to shape their policies and actions to be in accordance with this global consensus. But this is still new technology in largely unchartered waters. It remains unclear to what extent a reliance on smart contracts and algorithms to control processes like voting or financial transactions, for example, presents risks for abuse (à la Skynet from the “Terminator” movie series). Ultimately, the Blockchain is young and will likely to develop and change significantly in the next several years based on how people decide they want to use it.

To see the entire FinTech track from rpTEN, see the track homepage here.

Photo Credit: re:publica/Jan Zappner (CC BY 2.0)