Vitalik Buterin: belief

Transcript context

…The fees of the financial sector seem stuck at around 2 percent of GDP for a remarkably long period of time. And this is across an era where many other costs, even in percentage terms, have come down. Why do you think there’s this stickiness with financial fees, and where’s the first place where those fees will start to give in your vision of the future? It could be that these are constants that have to do with rent extraction rather than with any particular features of the technology. For example, when I was at this economics and computation conference in Ithaca, there was this presentation on high-frequency trading. One of the things that was mentioned in this presentation is that how — even though between the year 2000 and now, the rate at which disequilibria between different markets and between different assets that should have the same price kind of snap back into position — even though that time has decreased from something like 1 second to something like 50 milliseconds, the rate of profit that these HFT firms have been making has stayed pretty much constant. He came up with this economic model that said if you look at how a market works, and you come up with a model that says it’s not actually about the absolute speed of the market. It’s about whether or not the arms race between trying to cancel orders as they become irrelevant, and trying to snap up other people’s orders that are now mispriced. You get this result that the rate of rent extraction, the rate of profit, the rate of social loss totally does not depend on the actual absolute levels of technology and absolute levels of speed. I think if there is some dimension to finance which is some kind of zero-sum conflict, then that seems very plausible. Another thing that I might want to look at is percentages of expenditure that’s military expenditure over thousands of years. I know that 2 to 4 percent global is definitely low compared to historical norms, but it seems to be very possible that there’s some constant amount that at least humanity has been hanging around between 3000 BC and 1945. Why are there bid-ask spreads at all, and is it possible to get rid of them without putting them somewhere else, such as into mining costs?…

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