Can you hear it?

In a dimly lit corner, an old but familiar composer is getting ready for its show. You can hear people whispering its name, hinting at a grand performance yet to unfold.

The world may not be ready, but it’s melodies resonate. From the soaring heights of New York’s skyscrapers to the bustling streets of Hong Kong.

Instruments from every corner of the globe join the orchestra, each with their own distinct sound.

Then as if on cue, the silence shatters. The baton drops and a roaring sounds sweeps through the hall. The strings begin with the gentle hum of the Gross Domestic Product.

The brass section blares the ups and downs of the Consumer Price Index, while the percussion mimic the ebb and flow of the unemployment rates. The flutes dance to the rhythm of international trade balances.

Every instrument paints a vivid picture.

A symphony of economics, all harmonised by an all too familiar grandmaster — Macroeconomics.

But in the world of digital coins and virtual assets called Decentralised Finance (DeFi) there is the sound of a digital heartbeat. The start of a new age.

Sounds of bits and bytes mesmerise this virtual realm and capture the attention of many. Meme coins and yields of a thousand percent per year are far too captivating. Amidst this electrifying rave, the digital pulses send waves of euphoria through the crowd.

The old orchestra’s melody fades into the distance. Yet to some, the distant strains of the orchestra can still be heard. While the old and the new seem worlds apart, they are about to grow closer and closer.

At the heart of DeFi’s philosophy is the permissionless nature of its system, allowing anyone, regardless of their background or location, to access, build upon, or participate in the global financial market. It aims not only to enhance the efficiency with which capital can be distributed but also to democratise access to financial tools and services.

Given the immense value this vision holds, its relentless pursuit is undoubtedly worth it.

Even though DeFi is a relatively young sector, having been around for just a few years, it has already introduced several groundbreaking financial innovations. For example, stablecoins are tokens on a blockchain designed to maintain a $1 peg, provided the underlying collateral is well-managed

Decentralised stablecoins, such as MakerDAO’s DAI and the recently introduced Aave’s GHO, function as overcollateralised debt baskets. This overcollateralisation is essential given the inherent volatility of the digital assets backing these tokens. On the other hand, centralised versions, like Circle’s USDC and Tether’s USDT, are backed by reserves which may include US treasuries, cash, or other assets, depending on the policies of their issuing companies. These entities guarantee that users can redeem their tokens on a 1:1 basis for dollars, with the assurance based on trust in the issuing company's integrity and financial solvency.

This means that when someone sends USDC as a payment, they are essentially transferring a digital claim to US treasuries to the recipient. Centralised stablecoins, in essence, have potentially revolutionised how these financial assets are traded, making them accessible assets that can be transacted globally and around the clock.

Since its inception, the DeFi industry has envisioned bringing traditional assets onto the blockchain, including stocks, corporate bonds, intellectual property rights, and real estate.

Yet, the primary innovations to date have largely centred around the DeFi ecosystem itself, introducing groundbreaking concepts like on-chain lending, insurance, and derivative trading.

However, the prevailing bear market introduces a new set of challenges. The sustainability of DeFi is put to the test. In the past, high yields often arose from mechanisms tailored to bullish trends, driven by activities like leveraged trading or the issuance of additional protocol tokens.

With the market conditions shifting, it becomes crucial for the industry not only to adjust its strategies but also to chart a course that prioritises sustainable growth and consistent yield.

Underscoring this urgency is the sharp drop in cumulative total value locked (TVL) in DeFi. Once towering at an impressive $180 billion, it has now plummeted to just $40 billion.

Crypto users in pursuit of sustainable yield are driving growth in protocols tailored towards real-world assets (RWAs). This integration of traditional finance with decentralised systems is now materialising, offering DeFi investors yields that come from the world's most substantial credit markets.

Highlighting this evolution, MakerDAO recently entered into a strategic partnership with BlockTower Andromeda. This partnership channeled approximately $50 million into short-term US treasuries, bridging the initial divide between cryptocurrency and traditional assets.

If you're from the old-school financial club, you're probably reading this thinking, 'Eh, what's the big deal?'. And if you're a crypto degen, riding the blockchain roller coaster, you might be like, 'Why are we inviting these folks to our cool party?' Either way, bear with me - there's more to this story!

Capital efficiency is like a game where everyone's always looking for the cheapest deal with the highest return. Driving down the cost of capital has been the financial market’s ultimate objective. It’s inherent to the core of capitalism, ensuring that capital flows to the most promising opportunities with minimal friction.

Cryptocurrency and its underlying blockchain technology are well positioned to provide a new level of capital efficiency that aligns with the market's goals. While not entirely permissionless due to existing KYC/AML and capital requirements, this innovation marks a significant step towards traditional asset tokenisation. These regulatory measures, although countering the completely permissionless ethos of DeFi, are necessary steps to transition traditional assets onto the blockchain.

Users can effortlessly transition from an on-chain money market fund to an on-chain Real Estate Investment Trust (REIT) or an even more exotic art-backed loan. This efficiency stands in stark contrast to the traditional system, where individuals must wait for funds to clear and return to the bank before they can be reinvested into the REIT, a process that can span several days.

Consider the perspective of an Small and Medium-sized Enterprise (SME) in regions like Africa or South America. Facing exorbitant interest rates, sometimes as high as 12% monthly, the prospect of accessing global liquidity and reducing capital costs might seem like a distant dream. Yet, protocols such as Goldfinch and Jia are transforming this vision into reality, empowering small businesses globally to tap into vast liquidity pools.

As these enterprises consistently repay loans, they build a credible on-chain credit score, which, over time, can secure them even more favourable lending rates.

Jia has recently rolled out its pools in locations like Kenya and the Philippines, and the initial results are promising. Goldfinch, since its inception in 2020, has distributed loans totalling $100 million, boasting a commendably low default rate of 1.66%. Of this amount, approximately $28 million has been successfully repaid.

Streamlining financial procedures can significantly reduce the cost of borrowing. In markets valued in the trillions, even a slight uptick in efficiency can translate to billions in savings. Ultimately, these savings benefit the borrower, putting more money back into their pockets.

In the years to come, it's highly likely that the boundaries between the digital and traditional financial worlds will blur further. As more liquidity pours into the market, we'll see enhanced price stability, unlocking new levels of global economic productivity.

This evolution will not be confined to just the digital sphere, but will potentially affect the entire global economy. Slowly but surely, the digital realm will find its harmony, echoing more and more to the intricate compositions of macroeconomics.

Exciting times ahead!

Can you hear it?

In a dimly lit corner, an old but familiar composer is getting ready for its show. You can hear people whispering its name, hinting at a grand performance yet to unfold.

The world may not be ready, but it’s melodies resonate. From the soaring heights of New York’s skyscrapers to the bustling streets of Hong Kong.

Instruments from every corner of the globe join the orchestra, each with their own distinct sound.

Then as if on cue, the silence shatters. The baton drops and a roaring sounds sweeps through the hall. The strings begin with the gentle hum of the Gross Domestic Product.

The brass section blares the ups and downs of the Consumer Price Index, while the percussion mimic the ebb and flow of the unemployment rates. The flutes dance to the rhythm of international trade balances.

Every instrument paints a vivid picture.

A symphony of economics, all harmonised by an all too familiar grandmaster — Macroeconomics.

But in the world of digital coins and virtual assets called Decentralised Finance (DeFi) there is the sound of a digital heartbeat. The start of a new age.

Sounds of bits and bytes mesmerise this virtual realm and capture the attention of many. Meme coins and yields of a thousand percent per year are far too captivating. Amidst this electrifying rave, the digital pulses send waves of euphoria through the crowd.

The old orchestra’s melody fades into the distance. Yet to some, the distant strains of the orchestra can still be heard. While the old and the new seem worlds apart, they are about to grow closer and closer.

At the heart of DeFi’s philosophy is the permissionless nature of its system, allowing anyone, regardless of their background or location, to access, build upon, or participate in the global financial market. It aims not only to enhance the efficiency with which capital can be distributed but also to democratise access to financial tools and services.

Given the immense value this vision holds, its relentless pursuit is undoubtedly worth it.

Even though DeFi is a relatively young sector, having been around for just a few years, it has already introduced several groundbreaking financial innovations. For example, stablecoins are tokens on a blockchain designed to maintain a $1 peg, provided the underlying collateral is well-managed

Decentralised stablecoins, such as MakerDAO’s DAI and the recently introduced Aave’s GHO, function as overcollateralised debt baskets. This overcollateralisation is essential given the inherent volatility of the digital assets backing these tokens. On the other hand, centralised versions, like Circle’s USDC and Tether’s USDT, are backed by reserves which may include US treasuries, cash, or other assets, depending on the policies of their issuing companies. These entities guarantee that users can redeem their tokens on a 1:1 basis for dollars, with the assurance based on trust in the issuing company's integrity and financial solvency.

This means that when someone sends USDC as a payment, they are essentially transferring a digital claim to US treasuries to the recipient. Centralised stablecoins, in essence, have potentially revolutionised how these financial assets are traded, making them accessible assets that can be transacted globally and around the clock.

Since its inception, the DeFi industry has envisioned bringing traditional assets onto the blockchain, including stocks, corporate bonds, intellectual property rights, and real estate.

Yet, the primary innovations to date have largely centred around the DeFi ecosystem itself, introducing groundbreaking concepts like on-chain lending, insurance, and derivative trading.

However, the prevailing bear market introduces a new set of challenges. The sustainability of DeFi is put to the test. In the past, high yields often arose from mechanisms tailored to bullish trends, driven by activities like leveraged trading or the issuance of additional protocol tokens.

With the market conditions shifting, it becomes crucial for the industry not only to adjust its strategies but also to chart a course that prioritises sustainable growth and consistent yield.

Underscoring this urgency is the sharp drop in cumulative total value locked (TVL) in DeFi. Once towering at an impressive $180 billion, it has now plummeted to just $40 billion.

Crypto users in pursuit of sustainable yield are driving growth in protocols tailored towards real-world assets (RWAs). This integration of traditional finance with decentralised systems is now materialising, offering DeFi investors yields that come from the world's most substantial credit markets.

Highlighting this evolution, MakerDAO recently entered into a strategic partnership with BlockTower Andromeda. This partnership channeled approximately $50 million into short-term US treasuries, bridging the initial divide between cryptocurrency and traditional assets.

If you're from the old-school financial club, you're probably reading this thinking, 'Eh, what's the big deal?'. And if you're a crypto degen, riding the blockchain roller coaster, you might be like, 'Why are we inviting these folks to our cool party?' Either way, bear with me - there's more to this story!

Capital efficiency is like a game where everyone's always looking for the cheapest deal with the highest return. Driving down the cost of capital has been the financial market’s ultimate objective. It’s inherent to the core of capitalism, ensuring that capital flows to the most promising opportunities with minimal friction.

Cryptocurrency and its underlying blockchain technology are well positioned to provide a new level of capital efficiency that aligns with the market's goals. While not entirely permissionless due to existing KYC/AML and capital requirements, this innovation marks a significant step towards traditional asset tokenisation. These regulatory measures, although countering the completely permissionless ethos of DeFi, are necessary steps to transition traditional assets onto the blockchain.

Users can effortlessly transition from an on-chain money market fund to an on-chain Real Estate Investment Trust (REIT) or an even more exotic art-backed loan. This efficiency stands in stark contrast to the traditional system, where individuals must wait for funds to clear and return to the bank before they can be reinvested into the REIT, a process that can span several days.

Consider the perspective of an Small and Medium-sized Enterprise (SME) in regions like Africa or South America. Facing exorbitant interest rates, sometimes as high as 12% monthly, the prospect of accessing global liquidity and reducing capital costs might seem like a distant dream. Yet, protocols such as Goldfinch and Jia are transforming this vision into reality, empowering small businesses globally to tap into vast liquidity pools.

As these enterprises consistently repay loans, they build a credible on-chain credit score, which, over time, can secure them even more favourable lending rates.

Jia has recently rolled out its pools in locations like Kenya and the Philippines, and the initial results are promising. Goldfinch, since its inception in 2020, has distributed loans totalling $100 million, boasting a commendably low default rate of 1.66%. Of this amount, approximately $28 million has been successfully repaid.

Streamlining financial procedures can significantly reduce the cost of borrowing. In markets valued in the trillions, even a slight uptick in efficiency can translate to billions in savings. Ultimately, these savings benefit the borrower, putting more money back into their pockets.

In the years to come, it's highly likely that the boundaries between the digital and traditional financial worlds will blur further. As more liquidity pours into the market, we'll see enhanced price stability, unlocking new levels of global economic productivity.

This evolution will not be confined to just the digital sphere, but will potentially affect the entire global economy. Slowly but surely, the digital realm will find its harmony, echoing more and more to the intricate compositions of macroeconomics.

Exciting times ahead!