How This DeFi Platform Plans to Overhaul Traditional Finance
The CEO of RDX Works explains what DeFi is all about and how it is positioned to completely change how we deal with our personal finance.
Jessica Abo: Piers, for those who are unfamiliar, can you start by telling us about RDX Works and what you do?
RDX Works is a core developer of a public ledger, like Ethereum or Bitcoin or Solana. Ours is called Radix, and it's a public ledger entirely focused on decentralized finance (DeFi).
Decentralized finance is basically building financial products and applications on top of a piece of decentralized infrastructure (blockchain) that is designed to make it easy for people to create things like assets and services, in a way that is more digital-first than the current financial system we have today.
And so, if you've ever heard about things like Ethereum - platforms that allow you to build solutions like decentralized exchanges, decentralized money markets, or decentralized financial products - that make it easy for people to do investing, saving, and trading.
It's basically a new area of technology. In the same way the internet was a new area of technology back in the 1980s and 1990s, that's what we're seeing today - this new, revolutionary system that allows you to replace the current financial systems like banks, and create a new way of allowing people to build.
Why should we care about all of this?
The way that I often think about the current financial system is, it's a little bit like an archipelago of badly connected islands. So each bank has its own internal system, its own internal ledger. Each stock exchange has its own internal system, its own internal ledger. But actually, if you look at the banking system, a lot of transactions are done by Excel spreadsheets that are sent between companies to be able to reconcile because systems don't talk to each other.
Now, a bit like before the internet came along, people would do things by phone or by fax, but there wasn't a unified place where you could send information easily. And right now there isn't really a unified place in which you can create financial assets and move them around between companies. And that's what this infrastructure is for.
And I know it sounds very simple, but it's as simple as it was when we went from newspapers to reading things online. It was enabled by a bunch of new technologies and new platforms that were created, but couldn't have been created before.
One of the big revolutions of decentralized finance is this ability to create liquidity around long-tail assets. So when you think about the current financial system, you'll be like, well, Apple; I can go and buy and sell Apple stock. But if you're an entrepreneur and you're building a company, even if it's a relatively big company, your equity isn't very liquid. Your debt isn't very liquid. And that actually makes it harder to raise finance, it makes it more expensive to raise finance.
And what this infrastructure does is makes it radically easier for people to be able to access the financial ecosystem, and be able to do things that get out of the way of their business. It allows entrepreneurs to get on with doing the thing that actually matters, which is building great products for people.
Where does Radix fit into the DeFi universe?
When Ethereum first came out, people didn't really know what the purpose of these public ledgers was, what the idea of smart contracts was. And so they started playing around with different products and services. But it quickly became apparent that the real thing to use for these public ledgers is actually decentralized finance.
However, Ethereum and the competitors to Ethereum are not really designed for building an asset-first platform. So we think that decentralized finance is going to eat the 400 trillion global financial system. It's going to move everything to public ledgers in the same way that all information moved to the internet.
But to do that, you have to actually build a piece of infrastructure that's designed for the application that is being built. And what we found is, it's really difficult to build decentralized finance today. You see lots of hacks, lots of exploits, lots of problems that all come down to the tools that entrepreneurs have available to them to build with these systems.
So what Radix did is, we spent the last three years working with DeFi developers and DeFi projects to build an incredibly intuitive experience for being able to build these platforms and services.
You can think of Radix as an operating system, or a platform for people to build applications on top of it. We've created a programming language and a public ledger that makes it really intuitive for people to be able to harness the power of this new type of technology that came along and make it much easier for entrepreneurs that are thinking about launching a business in Web3, or launching a business in DeFi, or launching a business in crypto, to be able to go from idea to production code and take that down from two years to something like three months.
In simple terms, what is a smart contract?
Smart contract is really a difficult term. Because it's kind of a misnomer, right? It is not a contract from a legal point of view. A smart contract is a piece of code that exists on a public ledger. The code itself can control money directly. And so a simple example of a smart contract is, if I have some Piers tokens, I can send them into a smart contract. And the smart contract can say, okay, well, if someone sends me 10 Piers tokens, then I'll send them 20 Radix tokens.
But the smart contract does it on its own. It isn't on a server that's running on AWS or something like that. It's actually part of the public ledger. Now, this superpower is critical because it allows you to create more transparency around how finance operates. Right now if I go to a bank, I send my money to the bank, and the bank has its own general ledger about whose money is what. And then I have to ask the bank to get my money out.
With a smart contract, all of that money exists on a ledger. And then all of the code that deals with the logic as to who is allowed to access that money, what that money can do when interacting with other applications on top of the ledger, is all administered directly through the logic of the smart contract itself.
So you can think of it as basically a program that exists on a public ledger, that will follow the rule set to do with the administration of assets on its own without needing some company to be running that in the background.
Where do you think DeFi is headed? What are some of your predictions for 2023?
I think 2023 is actually going to be a consolidation year. It's going to be the year that people learn the lessons of what happened in 2021 and 2022, and work out what the real value was and what was created; things like how you create liquidity around long-tail assets.
I think what you're going to see in 2023 is a lot more real-world assets. So things like building debt, things like business financing, project financing - that's all going to start to come to public ledgers. And you're going to start to see more stitching together of what we think of traditional assets into this unified layer of financial products and services.
A lot of people talk about NFTs, and the Bored Apes artwork and stuff like that. These are kind of toys, but they're toys that represent what is actually possible to create with this technology. And you're going to see more serious companies coming in and building things that are actually more exciting than the traditional financial sector, but using all of the tools and power that's available from DeFi tool sets, like what Radix is building.
In your opinion, who do you think should go into crypto and who do you think should avoid it?
Everyone should take the time to learn. Not necessarily to go into, this is what my business is going to do in this space. Because we are still at an early stage. It is still the very early days of the technology. But go and use Scrypto, our programming language, that we've built to make it as easy as possible for people to get started in Web3 and DeFi. It's a great way to learn the tools and understand what the technology could mean to your business.
And that's the exploration that is necessary now. That's where the entrepreneurs who really take that initiative are going to have the most opportunity for their businesses in the next cycles. Because they'll have taken the time during these bear markets to understand how the technology might apply to their company, and how they can think about that for a long-term strategy of how their company is going to win as a result of this new tool set that's available to them.