Einstein defined insanity as doing the same thing over and over and expecting different results. So why is Web3 repeating many of the same mistakes that we’ve seen in traditional finance and big tech while expecting a better outcome?
Many early crypto projects offered — and many now still offer — carbon copies of traditional financial services. Periods like the DeFi summer of 2021 saw an influx of flawed “food”-named projects, many of which forked from one another, all doing the exact same thing. The subsequent rise of NFT projects also saw another wave of derivatives sharing the same ideas and underlying technology.
Why is innovation no longer at the heart of our industry despite the opportunities and novel ideas in our space?
As the adoption of stablecoins now increases, there are two camps emerging with very different objectives: building stablecoins for innovation and building them for disruption.
In the long term, it’s innovation that will provide the most benefit to Web3 and our financial freedom.
An example of this distinction exists in transportation. Tesla began building electric vehicles to disrupt the use of combustion engines with batteries. On the other hand, Bird scooters broke the cycle of “insanity” by taking similar battery technology and applying it to scooters. This was a complete innovation for transportation systems as it allowed users to access individual transport on demand without ever owning a vehicle, creating a seismic shift to the perception of what a transport company could be.
These two paths — innovation and disruption — solve competing problems in our financial systems and will answer vastly different problems.
At a base level, disruption looks to build upon and improve current systems, while innovation looks to challenge how existing industries think and operate, expanding what is possible to achieve.
Looking at crypto, so many teams trying to “disrupt” end up building the same thing with a shiny new name. How many DEXs exist out there? How many CEXs exist? Many of these projects fail to innovate by simply building the same thing over and over and expecting different results, many without addressing regulation.
For stablecoins, the primary goal of disruption is to create digital currencies that replicate the features of fiat. That is, digital currencies that can be used as a medium of exchange in the same way that traditional currencies and financial instruments work. While this is a great step, fiat has failed us over and over again — so why replicate it beyond a connector to traditional systems?
The end goal should be disrupting the existing financial ecosystem, and replacing it with decentralized and more efficient digital payments. While this is a great step in solving some of the problems in financial markets, replicating our current system is very unlikely to have a significant impact on how we use money or who has access to it.
On the other hand, building for innovation looks beyond the scope of remittances and payments, expanding technology to do things that fiat and fiat-backed stablecoins cannot do. We’re already seeing innovative applications such as DeFi, streamable money and staking — all of which enable access to new financial applications that do not exist outside of cryptocurrencies and, most importantly, are accessible to anyone.
Not only has DeFi enabled novel products like staking and undercollateralized loans, it has also made these financial instruments available to anyone with an internet connection and a digital wallet.
While stablecoins currently represent the disruption of fiat currency, the future of this technology actually lies in innovation and the creation of new financial instruments. Looking beyond fiat-backed stablecoins, technology like proportional-integral-derivative (PID) controllers can be applied to maintain the value of a cryptocurrency. PID controllers automate and decentralize this process to create market price stability without reliance on centralized fiat collateral.
It is these innovations that will take us further by bringing entirely new concepts to market, accessible to anyone in the world. One such potentially revolutionary product gaining traction is streamable money, a novel concept with the power to create greater financial freedom for both lower income and high income earners, globally.
Streamable money uses blockchain protocols to transfer stablecoins and other digital assets every second of the day, making money flow from peer to peer and business to business to deliver yields and rewards in real time, much like water in a stream.
The benefit? Users are able to access and invest their capital in businesses, save for a home or car, support their families and the causes they care about immediately instead of waiting until their next paycheck. While still in its early stages, concepts like streamable money would not be developed and continue to gain traction if we follow the same path as traditional financial tools (many of which remain little changed since the Medici family ruled banking in medieval Italy).
Why is it important to define the two?
The distinction between disruption and innovation is necessary because what we are building today will act as the entry point to digital assets for years to come.
The first step in driving innovation should be a renewed focus on the technology underpinning stablecoins in order to drive the creation and adoption of new products and services. Stablecoins are much more approachable for new users and significantly less prone to the ebbs and flows of traditional digital assets and traditional investment options like the stock market.
Read more from our opinion section: We’ll be thanking Web3 for Hollywood’s revival
The goal should be to attract people to Web3 with the familiarity that stablecoins bring, while also giving them access to DeFi, streamable money and other innovations that they can’t get in traditional financial markets.
By expanding the financial horizons of new users rather than relying on digital replicas of traditional banking, we’ll encourage further innovation and reduce our tendency to repeat the mistakes of traditional financial instruments.
I believe that in five years, every chain will have a native stablecoin with unique features that solve their specific use cases because they’re our best bet to democratize access to capital and create a more equitable financial system.
We don’t have to live out Einstein’s insanity; let’s champion innovation and do something actually new in Web3.
Joseph Schiarizzi is the Founder of Open Dollar, a lending protocol built on Arbitrum and has been a blockchain developer for 7 years. Before Open Dollar, Joseph worked at ConsenSys and later led Developer Relations for Gitcoin. He has contributed to impactful DAOs including Meta Cartel and Raid Guild, and is also the chair of the environmental sustainability council for Falls Church, VA. $5B+ has gone through smart contracts Joseph has contributed to.
Don’t miss the next big story – join our free daily newsletter.
This news is republished from another source. You can check the original article here