Is Low-Tech DeFi Possible?
Is low-tech DeFi possible? Yes. How difficult is it for low-tech DeFi to work? It's easier than we think. Then why wait?
Base Image comes from Pixabay. Edits made using MS Paint.
Post based on "Can DeFi Be Used with Low Tech?" by @magnacarta.
Can DeFi work with low-tech? Yes it can. It's probably taking place right now: most likely, either in places where central bank policies ran their economies into the ground, or in places which never had central banking to begin with.
Where else is low-tech DeFi working?
- the classic leomonade stand children set up during the summer;
- P2P financing of used cars where one person agrees to pay for a vehicle using gold or silver coins;
- someone asks family and friends for startup capital for a business;
- any John Wick movie.
DeFi is short for decentralized finance. All that means is that money transactions are handled between interested parties with few if any middlemen.
Cryptocurrency, smart contracts, and DeFi are all transforming the way we use money and think about money. The decentralization aspect of DeFi makes it possible for each of us to be our own bank. It's truly an amazing thing.
As amazing as crypto, smart contracts, and DeFi are, they share one critical (some would say fatal) flaw:
They Depend on Electricity
Weather events take out power grids all the time. Acts of pettiness are part of the human condition. We know what wars can do. Even if all is well on Earth, there is always that stray asteroid or runaway coronal mass ejection from the Sun. Any of these can make electricity unavailable for who knows how long. Without electricity, whatever crypto we have is beyond reach and may as well be figments of our imagination.
Heck, if time travel ever becomes a reality, the time traveler could end up in a period where electricity had not been invented. What if we brought to that low-tech period today's knowledge-- or tomorrow's-- of DeFi?
Principles of Cryptocurrency
Precious metals have been used as money for thousands of years. Certain base metals have also been used as money for just as long. Money also came in the form of gems, harvest, livestock, stones, even shells. Ultimately, money is whatever we want it to be and whatever we are willing to accept.
Cryptocurrency makes the use of money a trustless and permissionless process. With crypto, we don't need to trust somone to accept their payments. With crypto, we don't need anyone else's permission to do whatever we want with our money. It looks as if for DeFi to succeed in a low-tech world, these two principles need to exprssed in physical ways.
The cryptography potion of cryptocurrency may be difficult to implment in a low-tech world, if not virtually impossible. Perhaps it can be implemented, but I have no idea how.
However, older forms of money have ways of being authenticated. Acids can be used to test not only the authnticity of precious meteals but also the content present. I've seen this at coin dealers and jewelers. Gems have their own ways be be authenticated. Once authencity is confirmed, it's a matter of weighing the items used as money.
As for authenticating identity, documentation may be necessary. If not, maybe some other tool can be used for authentication. It could be as simple as tattoos or other forms of body modification. It could also be a low-tech way which doesn't need ID-- say, a password or passphrase, may be enough within a certain context.
Using our current level of knowledge, we can figure out a way to implement trustlessness in a low-tech world should that situation take place.
This could relate to how we acquire money.
If you go to a bank for a loan, you essesntially ask for permission to borrow money. If you want to apply for a mortgage, you need to ask for permission. If you want a line of credit, you need permission.
Cryptocurrency does away with that need to ask, and DeFi takes it even further.
In what ways can the permissionless aspect of DeFi be applied to a low-tech world? Same as we have for the digital version:
- P2P -- Peer-to-peer. If you've ever bought anything using newspaper classifieds (Newspaper? Classifieds? Newspaper classifieds??), then you've engaged in P2P commerce in a low-tech way. How you pay for merchandise is between you and the seller.
- Private Loans -- You agree to conditions for lending or borrowing. You also agree to conditions for arbitrating disputes.
Both P2P and private loans may be direct or indirect.
Just as important as finding ways to bring the principles of high-tech DeFi to a low-tech world or context is bringing about a paradigm shift.
Low-tech financing may be centralized, as it has been the last 2 centuries.
Even if low-tech financing is decentralized, can it be made trustless and permissionless?
In both cases, what's needed is a change in the way people think about money and financing and banking.
As long as we have electricity--
--we should ride the crypto train as long as that train moves. Should the time come when electricity is no longer available over a long period, we should find ways to apply the principles of high-tech DeFi to a low-tech world.
Just My Two Sats
We think of DeFi as a high-tech phenomenon made possible by the smart contract functionality of certain cryptocurrency platforms. However, DeFi has been around for as long as there has been trade and commerce between human beings. So much of that DeFi has been of the low-tech or no-tech variety.
The weakest link in any cryptocurrency is its need for electricity to operate. Even crypto mining requires electricity. Should there be a cataclysmic or extinction-level event, cryptocurrency is very likely to go
Poof! In that case, we may have bigger things to worry about. Assuming we can get past those initial jolts, we'll be back in low-tech living.
Not including cryptography, low-tech Defi can make use of the main features of cryptocurrency: being trustless and being permissionless.
If we're going to be living in a low-tech society (which isn't as far-fetched an idea as it seemed in 2019), we're going to need a paradigm shift in how we think of money, business, trade, and how we relate to each other. Low-tech societies tend to be more decentralized, which is actually what we would want in as many aspects of living as possible.
In what other ways can we bring the principles of DeFi to low-tech living?
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