Aug 25, 2021
NFT’s, Powerplays, and DeFi — Oh My! 💪🎨😮
TradFi to DeFi Weekly Wrap Up Aug 20th 21
TradFi to DeFi is a networking hub, project incubator, talent connector, mentorship provider, and opportunity maximizer for the DeFi enthusiast, whether new or experienced. Every Friday at 3 pm EDT, we host an open mic round table, where we discuss DeFi (decentralized finance), how it intersects with traditional finance, and where we see this whole thing going. This article briefly summarizes the topics of our latest discussion. Want to join us? Check out the links below!
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NFTs — What Makes Them Tick?
Whether we’re talking about the original (now highly coveted and priced) crypto punks or engaging new online card games like Gods Unchained, NFTs have quickly captured the public’s attention. Standing for “non-fungible token”, these NFTs represent ownership over finite digital assets. The ability to own a piece of digital art, card, or any other digital representation of wealth makes for a powerful value proposition in the minds of the average consumer. This week’s call contained excellent discussion surrounding the “what” and “whys” surrounding NFTs and what’s driving their meteoric rise!
Jon gave an excellent elevator pitch of a presentation exploring the two major attractive points of NFTs — flex and function. The concept of flex when it comes to these emergent digital assets is surprisingly straightforward. Much like being the only kid on the playground to have a first edition holographic Charizard Pokémon card (those are worth a lot too, by the way), having exclusive ownership over a rare digital asset allows the owner to demonstrate their exclusivity. Firmly rooted psychological mechanisms govern this process. The amount of desirable resources you own that are superfluous to your immediate survival directly demonstrates proportional wealth in society. To say it in a way that sounds less like an undergrad sociology paper — the rarer the item, the harder the potential flex. Add a dash of social media, and suddenly everyone and their grandmother boasts a profile picture of a pixelated hipster or an overfed penguin.
While an interesting experiment in psychology, many NFTs currently lack the robust functionality required for greater mainstream adoption. This reality is hardly a death kneel for the young asset class — it was only a few years ago that Wall Street and Main Street alike heralded the death of Bitcoin and crypto. Now, with both parties scrambling to the entrance of emerging DeFi products, one must wonder if NFTs won’t follow this same curve. For their part, gamified NFTs leverage the psychological engagement loop which keeps video game players interested in a game over extended periods. Much how the video game industry fomented gamification as a powerful concept in the public mind, this same approach exists in gamified NFT platforms like Galaxy Fight Club and Gods Unchained.
Power Play Post-Mortem
The recent crypto provision in the infrastructure bill has left a lot of people bummer about the future of the industry. While disappointing, Jonathan raised an excellent point regarding how government and regulators interface with emerging technologies.
“Crypto is new to politics, and politics is new to crypto” — Jonathan
SEC Chairman Gensler now finds himself in a precarious position. Directly admitting inability to enforce any meaningful regulation on truly decentralized protocol would be a stunning admission of an inability to do his own job. Crypto Texan offered an excellent example in the form of synthetics on Uniswap. Early on in its lifecycle regulators pressured Uniswap to remove synthetics, to which Uniswap complied… for the front end of their platform. As a distributed system, anyone can list synthetics on Uniswap — people just can’t access them from the front-end user interface.
This reality highlights an important point — over-regulation of blockchain and DeFi will only push innovation underground and out of the US jurisdiction. Given that decentralization exists as a spectrum and not a binary, regulators must carefully consider the scale, scope, and impact of any series of regulations. At this stage, kicking the can of regulatory ambiguity surrounding blockchain and DeFi proves to be the preferable option in the halls of power lest the wrong move entail a butterfly effect of cascading innovation collapse.
Self-Directed Hedge
Interestingly, this collapse can go either direction. Chuck told us part of his story as a traditional financial professional that fell down the rabbit hole of DeFi when exploring potential disruptions in his own industry. Many outside observers within the traditional financial industry recognize the cutting-edge innovation of DeFi as a force which greatly outpaces the innovative efforts of FinTech. Years’ worth of innovation occurs in mere months when it comes to DeFi — something that’s hard to ignore when your job might be on the line. For this reason, some financial professionals approach DeFi as a hedge against disruption rather than approaching from an angle of pure curiosity. In this sense, the adage of “If you can’t beat them, join them” rings true as the material facts on the ground now suggest that, like it or not, DeFi is at least eating part of the traditional financial landscape.
There are plenty of similar stories here at TradFi to DeFi. Tyler used to work for a broker dealer that wouldn’t allow him to talk to their clients about crypto. That same dealer just launched a crypto index fund. JPMorgan Chase CEO said in 2017 that he’d fire any employee caught trading Bitcoin. Deloitte just boldly stated that “The future belongs to cryptocurrencies, banks must embrace it.” Blockchain and DeFi continue to make disproportionately rapid inroads into traditional finance. Dimon may have appeared correct in 2017, but four years and one massive DeFi revolution later, Deloitte’s interpretation seems far closer to reality on the ground.
THE Place To Be!
Interested in DeFi? Worried how it might disrupt TradFi? …Excited about how it might disrupt TradFi? You’re in the right place.TradFi to DeFi consists of financial professionals from all walks of life. We’re on a mission to make sense of this rapidly evolving landscape and identify actionable opportunities for our community members. Check us out on Telegram, and make sure to join the Discord to participate in our weekly calls on Fridays, 3pm EST!
