Local Liquidity: Banking’s New Era
Imagine a world without banks. Fuck yes. I hear you — crypto-native — shout. Even normies have decades of righteous anger and resentment at the giga-financial institutions that, to some, effectively rule the world. They crashed the economy in 2008, and 1997, and 1970 — and, and. These charlatans have a lot to answer for, and yet they never seem to.
Don’t forget, never forget, that the crypto market as we know it was incepted through Bitcoin as a response to the bailout of the banking sector in 2008. A rebellion against state sponsored capitalism and a paean to cypherpunk libertarian ethics. Enough is enough. With peer-to-peer-financial systems, we could have our own inalienable money supply and store of value. We could crowdfund loans, housebuilding, and infrastructure investment. But wait, that’s what banks do already. Your retail deposits are the seed money for those capital allocations — you just don’t get any return. Wait, my bad. You get 2% yearly on what actually is 20% yearly. Don’t forget, the rise of the West in the last half-millenia from relative backwater global obscurity was not predicated on gunpowder, shipwright technology or more democratic and flexible government systems — but by banks.
The ability for a nation or society to draw efficiently from its populace by promising a return on colonial expeditions, the ability to facilitate trade not just between the next city but across entire continents — and beyond. Promissory notes, effective chains of custody between branches and mass aggregation of gold-backed wealth meant that suddenly hitherto pastoral medieval kingdoms could engage in vast infrastructure investments without the unstable crown needing to fund it from desperately inefficient tax regimes. The banks made the world we live in today, and so it’s no surprise they rule the world.
Ask an unbanked person living in a barter society unable to access capital of any kind without borrowing at extreme interest whether they want a world without banks, and they’d look at you with disdain like the patronizing elitist that you are. People want mass infrastructure investment crowdsourced from retail, people want cheap consumer credit, people want to access their money safely and cheaply without fear of it being stolen or disappearing. Countries with mature banking systems are the richest in the world for a reason.
The reason that crypto is so exciting for the investment class is precisely because it can replicate the incredible force-multiplier that effective banking systems are for societies while adding a host of associated benefits that not only rewire the political power of money, but also are simply more powerful. If Bitcoin has made a strong exemplar start for a peer-to-peer cash system, new crypto technology can create a peer-to-peer banking system. Onomy, for example, can facilitate worldwide remittance payments in a local currency at a fraction of the cost it would require to use a traditional Forex service.
And it can do it at scale. Whether it’s $1 or $1 million — an on-chain financial system doesn’t care. If a CEO can kickstart his building programme in Mali and get money into the hands of hundreds of local businesses nearly simultaneously — and be able to verify receipt of funds, all without having to rely on an immature banking system on their end and exorbitant fees on his, he will. Anyone would. When we’re talking billions of dollars, the basis points on fees really begin to add up. To expats and immigrants everywhere, the prospect of lending your friend a fiver back home is often preposterous. With Onomy’s Internet Financial System, it becomes second nature.
That’s just the tip of an enormous iceberg. Verifiable immutable peer-to-peer payments can be used to facilitate micro-loans across distinct regional communities. Suddenly, places with no banking apparatus have access to cheap credit. Even in mature economies like many in the West, ‘locally sourcing’ your credit but still within a completely private, trustless, semi-automated system, means the profits from that credit don’t go to bankers bonuses, but they go to other people in your township — without you or they ever knowing who each other are, and immutable safety underwritten by the ironclad blockchain. The potential for locally-sourcing savings and loans has the ability to create flourishing micro-economies where the value captured stays within the community itself. Even if that community is as big a country, with the potential for national infrastructure investments not having the profits creamed off by banking institutions lending governments and companies at inefficient rates — acting as a by-now unnecessary middleman to the whole exercise.
It’s here the cypherpunk ethos can mature into something more graceful. Banks are just accountants — the blockchain is all the accounting you ever need. They are just custodians. Through crypto, we are all the custodians, governed by immutable and verifiable code. We don’t have to trust anyone anymore, and much more importantly now — we don’t have to pay for the privilege. Finance is all about efficiency — a mature crypto ecosystem (we’re not there yet) is far more efficient than a mature banking system ever could be. Quite simply, there are far less people involved, most of the work of the banking system has been abstracted into code. And that is both faster and cheaper.
We’re not there yet. Blockchains like Onomy which are building institution-adjacent utility on blockchain like Forex markets, remittance, DeFi savings and loans all at breakneck pace are still seeking both adoption and integration. It’s natural, the crypto market is young. Yet the march is inevitable. Institutional crypto sounds like a betrayal of everything Nakamoto ever stood for — but it’s not. It’s the capital allocation efficiency of the blockchain taking over what the banks do because (eventually) it will be better at banking than the banks already are. The real fight now is to ensure that those crypto systems which do come online to onboard the financial system do not get co-opted by centralized powers, be that a CBDC from a national government with obscene privacy concerns or an oligarchal cartel running a crypto that is decentralized in name only.
The cypherpunk mission is now simply to ensure that this new peer-to-peer financial system enshrines privacy and remains decentralized. Otherwise we’re not making the banking system more efficient, we’re just adding extra steps and even more pernicious panopticon oversight of our daily spending activities. What you spend your money on should be your business and, year by year and decade by decade, it increasingly is not. Returning privacy to the financial system is essential to regain our liberty.
Not absolute privacy. You should pay your taxes. You can’t just steal money and launder it at will, or profit from crime and not be traceable. Yet there are plenty of ways to stop this using crypto already without sacrificing fundamental privacy rights. Soulbound tax tokens, distinct KYC’d pools for particular financial activity including high frequency trading, pseudonymous identity payment portals. Yet a decentralized financial system, alongside other decentralized infrastructure like edge networks and local internets, can stop the ever more oppressive invasion of our privacy from corporations and ultimately governments. A situation that has the potential to tip into an authoritarian hellscape faster than you can say ‘large language model.’ The ownership of your money is, and always been, the most powerful antidote to such nightmares.
A peer-to-peer financial system, like Onomy’s, is now possible with the tech we have. It’s now just about adoption and integration. We can bank the unbanked, instantly. We can community-fund local infrastructure. We can protect our privacy. We can have a more ecologically efficient financial system. We can send money anywhere in the world with no borders instantly. We can build a new economy that emulates the enormous power of the banking system without the disadvantages of bureaucratic cost and obscene political power. We can stop rapacious capitalism rewarding the few and replace it instead with a benevolent capitalism rewarding the many. We can own not just our own money, but every system through which it runs. A global network of people funding people, a society basking in the neon glow of a Nakamoto sunrise.
