1/ Finance has not kept up with advances in technology/Internet over the last 20 years. tradFi is mostly asleep at the wheel while an entirely new financial system is being built from scratch: DeFi. They just don't know it yet. But soon will wake up...
2/ As early players in this DeFi world, we have the opportunity to design a financial system from scratch. Combining elements of tradFi with unique new primitives enabled by crypto (flash loans, composability, AMMs, NFTs etc.)...
3 / A lot of the DeFi stack has been build behind the scenes over the past 3 years, forged in the fire of the bear market.
We're seeing these money LEGOs come together at an exponential pace. This is the power of DeFi - global, permisionless, and transparent capital markets.
4/ For end users, they don't/won't care to ask how this tech works in synchrony (oracles, consensus mechanisms, L1/L2). They'll be using dApps and notice the 10x improvement (rates, range of assets etc.)
They'll finally get an "Amazon/Google" like experience with finance
5/ Few in the developed world appreciate how broken the financial system is. It takes a trip overseas or sending a wire to realize this.
Like other technological revolutions, DeFi will become too hard to ignore. We're not far from that state of the world. Keep building
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A) Swap to USD & withdraw to bank (are they solvent next week?)
B) Swap to major (ETH/BTC) & take market risk
C) Hold USDC
Everyone in crypto is doing this calculation rn
Exhibit A: Circle held $33.6B in US Treasuries and $8.7B in US Banks*
* Cash held at U.S. regulated financial institutions BNY Mellon, Citizens Trust Bank, Customers Bank,
NY Community Bank, Signature Bank, Silicon Valley Bank and Silvergate Bank
1/ In this dark hour for the industry it’s crucial to remind ourselves why we’re here & why this matters. We’ve lost a lot of ground this year but let’s not lose sight of the good things happening. Among others, Ethereum migrating to PoS & scalability thru L2s
2/ I don’t think crypto goes away or remains niche. Digital scarcity/property rights are becoming an integral fabric of society & reshaping industries - similar to how the Internet did. We’re closer to releasing killer products that are too hard to ignore. Faster, better, cheaper
3/ Long gone are the days of recursive leverage. DeFi yields are lower than tradFi anyways. Many users have been hurt & lost confidence. Candidly, this raises the bar for us to deliver on the promise of creating wonderful apps/services powered by this tech. We have work to do
1/ Envision a state of the world where tokens need to register as securities (see @SBF_FTX 🧵). Is that the end of the world? Historically, it's been portrayed as such but I'm optimistic clarity will unlock much trapped energy
2/ A lot of regulatory uncertainty is already priced in and has help up many participants on the sidelines waiting for clarity to operate in DeFi & crypto
The spirit of the law is consumer protection & fairness, which I think are essential properties for any market to thrive...
3/ So if we abide by these core principles, there is a state where exchanges (FTX/Coinbase/Binance) become the gatekeepers where teams register to issue tokens. By the way, this already happens. The level of DD that some exchanges like Binance do on token issuers is rigorous...
1/ When you think you've missed a trend there's usually a 3-9 month window after the broader market discovers it where you can scale into a trade in size & still make outsized returns. You didn't have to catch DeFi at very bottom of last cycle & you won't this cycle. Here's why
2/ When Compound launched liquidity mining, the market woke up to DeFi. Until then only a few of us were investing across DeFi. Many thought they had missed the DeFi train. Data below supports my framework: usually have a 3-9 month window to catch up & still make outsized returns
3/ Interesting that you can buy core DeFi 1.0 protocols today at similar levels as the beginning of DeFi Summer in 2020. Arguably, many protocols are more de-risked having more traction to show for & Lindy effect. Rising rates changes the picture but still DeFi is not going away
1/ Crypto isn’t perfect. To expect it to be this early on is unreasonable. But the fundamental premise of having robust systems governed by predictable & transparent set of rules no one can control is here to stay. The possibility of having digital property rights is here to stay
2/ Crypto has a long way to go to realize its full potential. It’s important to remember this is still very experimental - on both the technical and socioeconomic side. The encouraging part is that the rate of experimentation is faster in open source systems (vs closed ones)
3/ As I reflect on the past 10 years since I discovered crypto, it’s been remarkable to see the growth of this industry. We’ve created trust-less systems that work. It’s become a trillion industry. It’s captivated the imagination of our generation from people of all walks of life