January 19, 2022 - Anthony Woolley

The Unified Theory of Digital Financial Markets

The Unified Theory of Digital Financial Markets  by Ami Ben David  –Founder & CEO at Ownera


  • Financial markets are entering a period of major digital transformation. This document offers a simple unified model to explain what it really means.

The global financial ecosystem is built on ACCOUNTS. Users have billions of accounts with financial institutions to manage their assets, currencies, and all other financial instruments – hundreds of trillions of dollars in total account value.

Transacting between these accounts IS our financial ecosystem – paying, investing, trading, transferring, lending, borrowing and so on.

Under the hood, it is a 50-year old spaghetti of incompatible accounts, trying to trade across thousands of financial institutions with different systems, networks and infrastructure providers, hundreds of asset classes (many still using manual processes), and across currencies and regulatory jurisdictions with complex and often unclear rules. Most of these platforms, processes and services were designed not only before the digital age, but also before the mobile or even the internet age. SWIFT, one of the major pieces of financial infrastructure is 48 years old, FIX is 30, and VISA is 63. Some markets, including most private markets, are still almost completely offline.

As we have seen in other information based industries, digital transformation is not about “fixing” old ecosystems – it is a switch to a new paradigm, from the services themselves to the business models around them. Netflix didn’t fix cinema and television – it created a new paradigm, which incumbents eventually had to copy.

  • Digital transformation in the financial markets

To understand how digital transformation will affect our account-based economy, I have therefore defined what I call the unified theory of digital financial markets which simply states the following:


Every Account will become a Digital Wallet


So how is a Digital Wallet different from a traditional financial Account?

  1. It has a global address (much like an internet IP) which ledgers can assign value to.
  2. It has a private key letting users and custodians sign transactions to prove intent.
  3. It allows direct and atomic instant trading between wallets.

“Digital Wallet” is a catchy name, but a digital wallet is simply a digital account that can directly transact with other digital accounts and assets, so when all accounts are digital:

All transactions can be direct and instant,
thereby making everything in the middle – redundant.


Let that sink in – all financial transactions in the global economy can be direct and instant. By turning accounts into digital wallets, we will remove massive layers of intermediary complexity, manual processes, reconciliations, margins, delays, errors, risks and costs.

Moreover, the financial digital transformation is driven by another unique capability of digital infrastructure – wallets can interact with smart contracts, enabling automated execution of agreements.

With instant direct transactions and agreement automation, the real impact of this digital transformation goes well beyond optimization and costs cutting:

Digital Wallets enable new services and business models that will

completely change the dynamics of entire markets


A simple practical example for new markets enabled by digitization is the extreme ease with which digital securities can be pledged as collateral at the source wallet – enabling instant “no-credit-check-needed” automated lending and leveraged products in multi-trillion dollar markets where this service simply does not exist today.

  • How do you digitally transform such massive markets?

And last, the unified theory of digital financial markets has one more key advantage, which is critical in a transition targeting the entire fortune of the human race.

It can be deployed gradually.


Digital wallet based services will be deployed over time in every financial sub market, but the transition can be gradual. Once digital wallet based services are deployed in a particular sub market, competitors in the space will be compelled to follow suit given the better products, services, cost structure, distribution, liquidity and business models enabled by digitization.

  • The implication of digitization for financial institutions

Digitization, enabling direct transactions between users and assets does not spell doom for financial institutions – it is exactly the opposite, this is an opportunity for both digital-native newcomers but also for the incumbents with their resources, reach and regulatory coverage – provided that they can see the strategic tectonic shift and mobilize their troops.

The vast majority of digital wallets are and will continue to be
managed professionally for users by financial institutions, and in the
traditional financial markets, exclusively by regulated financial institutions.

It is important however for financial institutions to read the map of the new digital battleground, which will be decided on three main fronts:

  1. Who can digitize the best assets and offerings and bring them online.
  2. Who can deploy secure digital wallet accounts with the best clients.
  3. Who can best utilize distribution, technology and data to connect 1 and 2.
  • Starting with Private Markets

Digital financial technology was born in the crypto space, and therefore the market assumed that the first implementation of digital wallets in financial institutions will be around crypto.

This is NOT the case. crypto is still a regulatory landmine for financial institutions and most have not yet deployed it. I believe they will, but it really depends more on regulators than the financial institutions themselves. Regulators are not paid to be early-adopters.

Instead, the majority of financial institutions are deploying digital securities first. Yet, with smart planning, those same wallets deployed today with the best clients, will tomorrow be used to trade any digital asset – from native-digital, to public assets to derivatives and any other asset class.

Years ago, when the world’s communication market switched from landline to mobile, some markets didn’t have landlines – these countries jumped straight to mobile… The same thing is happening now in the private markets.

Unlike public markets, which are already automated, private markets are stuck in the manual phase. There is almost no technology infrastructure, no “spaghetti” to replace – which makes private markets ideal for deployment of the new digital solutions, as well as make the advantages clearer. When you can turn a manual investment process that takes 2 months, into a one-second click, you clearly have a winner.

Not only that, private market are growing at an unprecedented rate, in Sep 2021, Blackrock suggested that “We believe that the allocation to private markets in wealth portfolios should increase from 5% today to 20%…

In addition, in private markets, digital ledgers are replacing Excel sheets and papers, so regulatorily, digitization is relying on existing regulation, and clearly delivering better services and transparency.

To analyze the potential, here is an analysis of four asset classes, and the potential that digitization has for transforming them:


  • The GDF Private Market Digitization Steering Group

Over the last year and a half, a group of some 70 major banks, asset managers, exchanges, fintechs and legal experts have been working together under the leadership of non-profit organization GDF, to develop an open source protocol to interconnect all the various components of the new digital private markets.

The protocol is called FinP2P – see specifications.

FinP2P is not a blockchain in itself, it is a routing network, a trading pipeline, allowing financial institutions to connect assets from any source, and on the other side give clients a digital wallet that connects them to all suitable assets and other wallets.

The protocol then acts as a pipeline that allows everyone to trade with everyone (within regulation and permissions) – thereby enabling the core promises of the unified theory of digital financial markets.

How FinP2P works


This document outlined a model in which all financial accounts will become digital over time, thereby enabling direct and instant transactions between wallets and assets. This vision is materializing in front of our eyes as financial institutions all over the world are starting to digitize assets, deploy digital wallets, and the FinP2P pipeline to connect them all.

While these digital wallets will be deployed initially for private market applications, they will in time support crypto assets, public equities, derivatives, and any other financial institution – The race to digital market leadership is on.

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