What do camera makers and banks have in common? They have both made the transition into the digital word, yet they are challenged by disruptive technologies. The smartphone already killed the market for point-and-shoot cameras. They are now about to kill the higher end. In finance, we are not nearly as far down the road, but this is starting to happen there too. Decentralised finance, which is based on crypto technology, has started with a modest offering of betting services, financial swaps, and other financial products that do not need interaction with the physical world. You cannot buy a house in this way, not yet. But technology and services are developing fast. The big crypto development this year has been the rise of the non-fungible token, a crypto asset that allows people to sell digital artworks, and much more. Think of it as an auto-enforced digital copyright.

You might ask yourself now: what has this got to do with me? The answer is: the disruptive technologies of the 21st century are coming to where you are wherever you may be, in government, in finance, in the media, and in universities too.

Decentralised financed, or Defi as it is known in crypto community jargon, is en route to usurping parts of the financial sector. It is the big disintermediation, akin to what supermarkets did to corner shops. Specialised segments of the financial industry will continue to prosper. Outside of finance, universities are a particularly vulnerable target. It is far from clear that they are the best places to learn about the fast evolving 21st century technologies. Some are trying to keeping up. But the cutting edge crypto and machine learning technologies are not primarily developed by university researchers, but by the likes of Google, Apple, their Chinese competitors, together with countless geeks in their basements.

We don’t know who Sakoshi Nakamoto is. Nakamoto is the pseudonym of the author who wrote the bitcoin white paper in 2008, a technical document that formed the basis for the bitcoin blockchain. Nakamoto may be a man, a woman, or an organisation. He/she/it may have been a university professor, or worked in the private sector. Through some references in the paper, we assume that the way central banks responded to the global financial crisis in 2008 might have been a trigger for bitcoin. Nakomoto's genius consisted of pulling existing technologies together in a truly original way.

Bitcoin will not replace fiat money, just as Defi will not replace the entire financial sector. Nakamoto designed bitcoin as a transaction currency that would be independent of governments. Nakamoto did not claim that bitcoin would usurp all functions of money, including its role as a store of value, or a unit of account. But it may still constitute the beginning of the end of fiat money. If central banks fail to control the endemic instability caused by a doom loop of financial deregulation and central bank asset purchases, global demand for non-official money as a store of value will rise.

The late Paul Volcker once joked that the only financial innovation he witnessed in his lifetime was the ATM machine. The creation of a hack-proof, unofficial transaction currency is probably the next one. It has already spawned countless other innovations, especially Etherium, the blockchain that allows decentralised finance applications.

The complacent world of central banking and economics has long been in denial when it comes to the threat from crypto money and crypto finance. This is mostly due to a mindset that confuses what shall not be with what cannot be. In the world of crypto money, there are no monetary policy boards, no advisory committees. If you are an economist, this is a world that works entirely without you. Central bank digital money is not the answer to crypto currencies. They are the hybrid car in a world in which electrical cars dominate. If you want to go with digital money in the future, you probably want the real thing, rather than a digital version of fiat money.

Central bankers view crypto as a bubble that will deflate on its own. There have been instances of bitcoin exchanges going down, but the bitcoin blockchain has functioned without interruption since its inception. Bitcoin is a volatile asset, for sure, but remember that this volatility only exists because we reference the value of a bitcoin to the dollar. Volatility only ever exists against some reference.

As a long-standing observer of Europe’s fragile monetary union, I wonder whether it will become possible for parallel cryptocurrencies to challenge the euro. During the euro area’s sovereign debt crisis, economists in Greece and Italy toyed with the idea of a parallel currency, in the disguise of a short-term debt instrument. In Italy, they were known as minibots. They were a clever idea, but ultimately doomed because they were subject to institutional support and legal constraints. A parallel cryptocurrency would be a much more flexible instrument.

A government could, for example, allow taxes to be paid in cryptocurrencies, and use revenues to pay suppliers. The crypto market would offer some financial services, including fully collateralised lending. It would offer unregulated savings instruments. Fiat money won’t disappear, but it will lose its monopoly status. When that happens, central bankers will find that they are no longer in control. Nobody has to exit the euro, or trigger Art. 50 TEU.

On a technological level, the battle that is taken place right now is not between digital and analogue, but between digital and digital. Kodak made the transition from analogue to digital sensors, but did not keep up with the competition. The likes of Canon and Nikon transitioned from analogue to digital cameras, but they are now usurped by purely digital smartphones, with advanced computational photography.

Another example is from mathematical finance. The pricing of financial derivatives has been based on mathematical models, based on deep theories of stochastic processes. They, too, are increasingly being usurped by machine learning algorithms. The first generation of translation software was based on clever language algorithms from mathematical linguistics. The experts at the time never took Google seriously because of their complacent belief that statistical translation will never catch up with their superior knowledge about the structure of language. The artificial intelligence people have won the battles.

Where I suspect the biggest disruption will come from is not just technology, but how it interacts with politics. The growing distrust of official institutions, including central banks, has created a demand for an alternative to fiat money. Crypto has been used for money laundering, but also to fund opposition movements in autocratic regimes. It exists because there is a demand for it. It is a political creature. It exists because capitalist societies have failed to produce stability, and because of the rise of pseudo-democratic regimes. And it flourishes because it is underestimated by those most at risk from it, and who have no idea how to contain it.