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- 🟪 Will crypto become the Linux of finance?
🟪 Will crypto become the Linux of finance?
The crypto year of two thousand and twenty-four is already off to a great start — but not for the reason decentralization maxis have been hoping for.
“In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.”
Will crypto become the Linux of finance?
The crypto year of two thousand and twenty-four is already off to a great start — but not for the reason decentralization maxis have been hoping for.
Bitcoin — the anti-establishment, cypherpunk currency — is approaching a two-year high in anticipation of an ETF that is likely to be approved thanks to Blackrock, the epitome of establishment finance.
That feels like an appropriate way to start a year that may come to be defined by the ironic juxtaposition of crypto being buoyed by increasing adoption within the financial system it intends to replace.
This paradox is best illustrated by Jamie Dimon, who thinks crypto should be banned, but whose bank may be doing the most to promote institutional adoption of digital assets.
Crypto people — seeing hypocrisy in Dimon’s stance — view the coming ETF as a trojan-horse first step in undermining traditional finance from the inside.
Traditional finance people — seeing hypocrisy in crypto’s regulatory arbitrage —- view the ETF as a first step in co-opting crypto for their own regulated, institutional purposes.
There are merits to both of these points of view, but I suspect the battle between crypto purists and finance pragmatists may play out more peacefully — much like it has in the software industry.
In the same way that open-source, not-for-profit Linux remains a core building block of the giant, for-profit software industry, decentralized crypto may become a core building block to a larger ecosystem of digital assets.
Which is to say, crypto could prove to be the Linux of blockchain-based finance.
Open-source profits
The internet is mostly decentralized in large part because it's built on top of Linux, which, among other things, allowed anyone with a computer to spin up a web server and contribute content to the World Wide Web.
It’s made the infrastructure better, too. Without Linux, the all-important internet would likely have been slower to develop, slower to run, more expensive to use, and easier to break.
And it’s as important as ever: The for-profit software industry that has developed on top of the internet continues to be powered by free-to-use Linux.
At the start, the open-source ethos of Linux encouraged volunteer contributors to develop a promising new technology — now, that technology is so important that Linux is continually being updated with thousands of patches contributed by thousands of developers working for hundreds of for-profit corporations.
The benefits run symbiotically in both directions: The skills needed to maintain Linux are the same skills needed to manage and develop for-profit software — skills that are now relatively common because they were originally developed by everyone voluntarily contributing to Linux.
This is one reason why, as Linux became ubiquitous, corporations recognized that the success of the for-profit software industry was in many ways dependent on the success of not-for-profit Linux.
You can probably see where I’m going with this: Crypto might do for finance what Linux did for the software industry.
That would be no small thing — today, over 90% of the public cloud runs on Linux, as do 80% of the world's smartphones.
Some (like Larry Fink) think 80 or 90% of centralized finance may someday run on blockchain rails.
If so, it will have decentralized, open-source crypto to thank.
It takes a village
Moving finance to centralized blockchain rails is not the revolution that crypto people have envisioned.
But even if most of finance remains centralized, not all will be lost.
The principles of decentralized crypto are likely to influence a blockchain-based financial system in the same way that the open-source Linux community has exerted outsized influence on the for-profit software industry — and the for-profit finance industry may make vital contributions to open-source crypto in the same way that the software industry does with Linux.
Crypto purists may see that as a partial victory, at best, but it might turn out to be a win-win outcome, as with the all-conquering software industry.
The internet as we know it would not exist without open-source Linux and open-source blockchains may become its financial equivalent: A decentralized core that enables a much larger for-profit, centralized ecosystem.
Decentralized finance may never be faster or cheaper than traditional finance, in which case crypto is unlikely to ever be where most finance happens.
But blockchain pragmatists and crypto purists could, like alligators and plovers, prove to be symbiotically co-dependent.
(Which is the alligator and which the plover is TBD.)
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