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Dr. Nicholas Adams Judge: Crypto Assets as Financial Innovation, Not Just Fintech

Crypto Assets as Financial Innovation, Not Just Fintech

The author, Dr. Nicholas Adams Judge, is a political economist and cofounder of RootProject. The other cofounder is Chris Place, a Y Combinator Fellow. The nonprofit’s pre-ICO recently passed 203% of its funding goal and is open until July 28th, 2017. The cofounders are taking zero tokens and no compensation beyond a reasonable salary.

Most coverage of cryptocurrencies focus on either the underlying tech or recent market developments. Cryptocurrencies’ most important features — the economic ones — get left to the side or dismissed as ‘magic’ by crypto purists who think ICOs are just a trend.

If you want to think seriously about crypto assets you have to think about them in terms of the new institutional capacities they create. If you think well-planned institutional arrangements designed in conjunction with a new asset class is ‘making something up out of thin air’ or ‘magic’ then pick up a history book.

Cryptocurrencies allow for an asset to be designed that investors can put value into even in the absence of underlying market activity. If you don’t think that’s a big deal then I really don’t know if you’re awake while reading this.

I’ve talked elsewhere about the topic. Here I’m going to lay out the development of crypto assets in the context of financial innovation.

Derivatives and Financial Innovation

Financial innovation has been going on, by historical standards, at a breakneck pace. Since large financial institutions have gamed the system and bought off regulators, it has literally broken many necks, as lives were ruined in multiple completely unnecessary recessions.

But financial innovation is different from the political subterfuge of wannabe oligarchs. One is positive, the other is negative.

Derivatives get a bad rap because of their role in the financial crisis. However they are such a broad array of asset types that blaming them for anything i...

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