Paradigm’s Brendan Malone argues that blockchain technology will reshape finance and much more. Malone, who transitioned from a role at the Federal Reserve to Paradigm in the cryptocurrency industry, believes that the impact of blockchain is already being felt across the global financial system, though many remain unaware.
Malone, a crypto enthusiast since 2013, claims traditional finance relies on costly, exclusive systems. He asserts that blockchain technology can change this by offering a decentralized and accessible network for building financial systems. According to Malone, the blockchain reduces the massive entry costs associated with traditional financial infrastructure, enabling broader participation in the financial sector.
High costs and slow innovation in traditional finance
Malone criticizes the traditional financial sector for being expensive and slow to innovate. He highlights how building financial systems typically involves significant expenditure, such as the Federal Reserve’s $500 million investment in the FedNow service, which operates alongside the existing Fedwire system.
Malone points out that financial institutions like the Intercontinental Exchange, which owns the New York Stock Exchange, spend hundreds of millions annually on technology and infrastructure. This, he suggests, stifles competition and innovation. Without competition, established players have little incentive to innovate or reduce costs, allowing them to charge higher prices without fear of losing customers. He contends that these legacy systems prioritize protecting their established positions over embracing new ideas.
Malone argues that blockchain offers a solution by lowering barriers to entry. Building a payment system, for instance, no longer requires a large data center; it only requires a crypto network. Similarly, creating a new kind of exchange does not demand heavy infrastructure, as it can be done on a public blockchain where costs are limited to actual usage. Furthermore, Malone highlights that blockchain-based systems are inherently compatible, reducing the need for complex integrations.
Challenging the decentralization debate
Malone addresses the ongoing debate about the need for decentralization in every aspect of technology. He acknowledges that decentralization can introduce inefficiencies but dismisses arguments against blockchain due to its costs. According to Malone, a secure, public infrastructure is essential when so much of daily life is moving online. He also rejects claims that blockchain benefits can be achieved without cryptocurrencies.
Tokens like Ethereum (ETH) are necessary for these networks to function, incentivizing developers to create new projects and applications. Malone encourages those in the cryptocurrency industry, especially those involved in policy-making, to focus on improving the technology rather than dwelling on its challenges.
The potential for broader Blockchain applications
Paradigm’s Malone believes that blockchain technology’s benefits extend far beyond finance. He argues that blockchains enable a new way of doing business by lowering entry costs and fostering competition. For example, companies can build payment systems or exchanges without substantial upfront investment in infrastructure. Instead, they can use public blockchains that are already operational and pay only for their actual usage.
Malone emphasizes that blockchain technology is inherently collaborative, allowing different systems to interact seamlessly without complex integrations. He believes this potential for interoperability is a key advantage that traditional financial systems lack.