Does Blockchain Matter?
I’ve been a bystander in crypto/blockchain world since the early days(only if I can time travel and ask my younger self to start mining in 2012). As of today, I hold 5% of my net asset primarily in BTC, ETH for diversification purposes. Recently, I started to look into the field more seriously given the development in Defi/NFT, and here is my point of view:
Blockchain technology is yet another technology like Internet/AI. The key difference is blockchain is born to disrupt EXISTING financial systems, while other technologies empowers NEW use cases.
Most of people will embrace internet, mobile phones because it makes ones’ life easier by facilitating the flow of INFORMATION. Worst case, if the technology isn’t mature, one can retreat by trading off some inconvenience relying on old technologies. A typical adoption curve applies here.
INFORMATION technologies has long profitability cycle where one has to create a product, acquire users, figure out a business model before money(VALUE) kicks-in. Venture capitalists facilitates the velocity of product development with the goal to acquire as many users as possible: business model can come late, if nothing viable, one can always run some Ads.
Blockchain is different: it is a technology empowers the transfer of VALUE. The most prominent use case that relies on blockchain is probably digital currency itself. Interesting fact: blockchain is taken seriously after BTC becomes viral, not the other way around.
Due to the intrinsic VALUE aspect, this area attracts more scammers than other technology because it’s much easier to front-load the investment, scale up the ponzi-schema and exit tracelessly(During ICO rush in 2017, fancy projects are everywhere with white-paper too sophisticated to understand).
Scammers will always be there. At the same time, there is a group of people religiously innovating in the space. If you dig into the rabbit hole, if feels like cyberpunks building a parallel universe. While the press is joking around Doge-coins, the Defi world has been evolving fast: Collateral(Maker), Swaps(UniSwap), ETF(TokenSet), Structured Product(Ribbon), you name it. In no time, Defi will have more sophisticated financial products than the Wall Street.
Why? Because it’s open sourced and allows open knowledge sharing and fast iteration. The flow of VALUE is programmed and audited. Even if something goes wrong, you blame no-one and build the next version with better reliability. For example, DAI is stablecoin collateralized with BTC, suffered unstable price/lost collaterals during large liquidation event. Overtime, it has become more resilient and scaled to accept other collaterals(Real Estate is happening.).
And yes, there will of course be more scammers in the game. Tether, for example, is another stablecoin issued by a company claiming it’s 1 to 1 pegged to US Doller, with little transparency on where the reverses are. These projects will burn or bust, after all one of them will survive and become a widely accepted stablecoin, so are the other Defi products.
What’s unfortunate is, due to regulations, or cyberpunks choose to, the parallel universe is not really connected to the real world(Or someone will tell me, that’s the real world Gen Z+ are living in). The ones(Coinbase, BlockFi) did, are already making huge debut, just think about how disruptive it will be when the full-fledged underground financial system is exposed.
Yet the fruit may well be picked by the Wall Street. After all, it makes no difference to the public if the backbone is switched to a blockchain based solution. Users might actually be happier when they found their banks’ transfer fees are lower, yield rate are higher, mortgage rate is lower, etc.
Consumers have no interests know how a CDO means, they will just assume Wall Streets are evil and took their money during a “financial crisis”. The ones playing the game is a club of elites and riches. They will throw money to recruits those smart contracts engineers and figure this out by themselves.
More interesting is, the blockchain technology is evolving very differently around the world: highly regulated US financial market is pushing crypto into an asset class rather than a currency. More regulated place like China is shutting mining activities while promoting its own crypto solution. I’m most excited about Countries like El Salvador, Nigeria: where users are craving for the technology so it can evolve as a free form.
Alright…wait till I talk about NFT…
For anyone who’s reading this, if you don’t want to spend time digging into all the nonsense, at least invest a bit into BTC, it’s a superior asset class regardless what’s the application.
If you are also interested in this and want to exchange ideas, hit me up on twitter.
