What Is Decentralized Finance?: A Deep Dive by The Defiant

“Decentralized finance (DeFi) offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain. DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts.”

Decentralized Finance is disrupting the traditional banking system. Today, all financial interactions are mediated by a bank or central institution. DeFi removes this middleman through the use of blockchain, making way for a whole host of new applications and efficiency gains. Immediate loans, instant borderless P2P payments, and secure lending are just a few applications being utilized by millions today. The Total Value Locked in DeFi platforms, a metric that represents the amount of money held in DeFi smart contracts, surpassed $250bn in 2021. That’s larger than Wells Fargo and over twice as big as Goldman Sachs.

DeFi threatens to upend large financial institutions around the world. Here are some questions I have surrounding DeFi:

1. The US Dollar is the current world reserve currency, blessing the US with a mountain of international influence and power. Will digital currencies get in the way of the Dollar as the world reserve currency? What will mass adoption of digital currencies do to the United States’ international influence?

2. If everyone is using digital currencies instead of US Dollars, changing the money supply will have little to no impact on inflation and unemployment. When we see mass adoption of digital currencies, what will this do to the Fed’s ability to enact monetary policy? Will the US attempt to squash digital currencies, or create their own and hope for a greater market share? We are currently seeing how the Fed can get monetary policy wrong. Is taking power out of the hands of the Fed a good thing? What are the possible downstream impacts of removing power from the hands of the Fed?

3. **If the Fed does create a digital currency, how will this change how they execute monetary policy? **Increasing and decreasing the money supply becomes as easy as clicking a button. What impacts will this have on markets?

4. Finally, how will the US move to regulate this space? The decentralized nature of DeFi makes it difficult to track usage and enforce regulations. Due to the power that DeFi promises, overregulation runs the risk of stifling technological innovation that could hugely benefit the US in the long term. How should regulators balance the trade off between free market innovation and law enforcement?

Strong and Weak Technologies | Chris Dixon

In his article, Chris Dixon, crypto investment partner at a16z, highlights an interesting phenomenon. Paradigm-shifting tech often arrives in pairs, a strong form and a weak form.

“Weak technologies adapt to the world as it currently exists. Strong technologies adapt the world to themselves. Progress depends on strong technologies.”

Some examples include virtual reality (weak) versus augmented reality (strong), video on demand delivered by cable companies (weak) versus app-based media companies [e.g. Netflix] (strong), hybrid cars (weak) versus fully electric cars (strong), and intranet (weak) versus internet (strong).

Steve Jobs was famous not for giving the customer what they thought they wanted, but rather what they didn’t know they needed.

During a media tour in 2007 in which Steve Jobs showed the device to reporters, there was one instance in which a journalist criticized the iPhone’s touch-screen keyboard.

“It doesn’t work,” the reporter said.

Jobs stopped for a moment and tilted his head. The reporter said he or she kept making typos and the keys were too small for his or her thumbs. Jobs smiled and then replied:

“Your thumbs will learn.”

Weak technologies give people what they want. Strong technologies give people what they didn’t know they needed. “Your thumbs will learn.”

Twitter: https://twitter.com/jackbutcher

“Simplicity is the ultimate sophistication.” -Leonardo da Vinci

A few months ago, I stumbled upon digital artist Jack Butcher. His work is satisfyingly simple, yet has the ability to speak volumes about the concepts he portrays. I love his work, and figured I’d end my first content list with one of my favorites.

“customers, community”

Communities > customers.

Building a community from your customer base exponentially increases the value of your product. Community strengthens brand loyalty, amplifies network effects, and turns users into salespeople. Communities stick together through downturns — customers do not. You may have built a large customer base, but have you built a community?

- Bennie iii

What Is Decentralized Finance?: A Deep Dive by The Defiant

“Decentralized finance (DeFi) offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain. DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts.”

Decentralized Finance is disrupting the traditional banking system. Today, all financial interactions are mediated by a bank or central institution. DeFi removes this middleman through the use of blockchain, making way for a whole host of new applications and efficiency gains. Immediate loans, instant borderless P2P payments, and secure lending are just a few applications being utilized by millions today. The Total Value Locked in DeFi platforms, a metric that represents the amount of money held in DeFi smart contracts, surpassed $250bn in 2021. That’s larger than Wells Fargo and over twice as big as Goldman Sachs.

DeFi threatens to upend large financial institutions around the world. Here are some questions I have surrounding DeFi:

1. The US Dollar is the current world reserve currency, blessing the US with a mountain of international influence and power. Will digital currencies get in the way of the Dollar as the world reserve currency? What will mass adoption of digital currencies do to the United States’ international influence?

2. If everyone is using digital currencies instead of US Dollars, changing the money supply will have little to no impact on inflation and unemployment. When we see mass adoption of digital currencies, what will this do to the Fed’s ability to enact monetary policy? Will the US attempt to squash digital currencies, or create their own and hope for a greater market share? We are currently seeing how the Fed can get monetary policy wrong. Is taking power out of the hands of the Fed a good thing? What are the possible downstream impacts of removing power from the hands of the Fed?

3. **If the Fed does create a digital currency, how will this change how they execute monetary policy? **Increasing and decreasing the money supply becomes as easy as clicking a button. What impacts will this have on markets?

4. Finally, how will the US move to regulate this space? The decentralized nature of DeFi makes it difficult to track usage and enforce regulations. Due to the power that DeFi promises, overregulation runs the risk of stifling technological innovation that could hugely benefit the US in the long term. How should regulators balance the trade off between free market innovation and law enforcement?

Strong and Weak Technologies | Chris Dixon

In his article, Chris Dixon, crypto investment partner at a16z, highlights an interesting phenomenon. Paradigm-shifting tech often arrives in pairs, a strong form and a weak form.

“Weak technologies adapt to the world as it currently exists. Strong technologies adapt the world to themselves. Progress depends on strong technologies.”

Some examples include virtual reality (weak) versus augmented reality (strong), video on demand delivered by cable companies (weak) versus app-based media companies [e.g. Netflix] (strong), hybrid cars (weak) versus fully electric cars (strong), and intranet (weak) versus internet (strong).

Steve Jobs was famous not for giving the customer what they thought they wanted, but rather what they didn’t know they needed.

During a media tour in 2007 in which Steve Jobs showed the device to reporters, there was one instance in which a journalist criticized the iPhone’s touch-screen keyboard.

“It doesn’t work,” the reporter said.

Jobs stopped for a moment and tilted his head. The reporter said he or she kept making typos and the keys were too small for his or her thumbs. Jobs smiled and then replied:

“Your thumbs will learn.”

Weak technologies give people what they want. Strong technologies give people what they didn’t know they needed. “Your thumbs will learn.”

Twitter: https://twitter.com/jackbutcher

“Simplicity is the ultimate sophistication.” -Leonardo da Vinci

A few months ago, I stumbled upon digital artist Jack Butcher. His work is satisfyingly simple, yet has the ability to speak volumes about the concepts he portrays. I love his work, and figured I’d end my first content list with one of my favorites.

“customers, community”

Communities > customers.

Building a community from your customer base exponentially increases the value of your product. Community strengthens brand loyalty, amplifies network effects, and turns users into salespeople. Communities stick together through downturns — customers do not. You may have built a large customer base, but have you built a community?

- Bennie iii