Why I’m excited about DeFi – and yes, Crypto – It’s a better Finance

Finance is being reimagined by DeFi & crypto technologies. This presents opportunities to generate 10X improvements and release trapped value in the Real World.

Finance is being remade

Finance is being reimagined by Blockchain/DeFi/Web3 and crypto technologies. However, the biggest change doesn’t come from new technology, but from a new way of thinking about Finance: a financial system built without intermediaries (who in many countries operate under outdated legislation that heavily favors incumbents, and/or provide the wrong incentives), a new way of establishing trust (via a distributed consensus), and how to execute agreements (automatically via smart contracts without depending on a country’s legal system). This presents new opportunities to generate 10X improvements and release trapped value in the Real World.

How it’s better

The New Finance is open (anyone can build new applications), global (anyone in the world can have access), transparent (all transactions are recorded publicly), accessible to many more people (it literally costs nothing), and it is also much more flexible, allowing for a more open innovation model by easily combining protocols (through composability). 

What’s the Vision

The Vision is open & global finance and capital markets, especially to make them available to the large proportion of people and businesses in the world that currently don’t have access to or are underserved by them. In other words, democratize (vs. privileged) access to capital.

[As an aside, this is not a call for no regulation, but to define rules taking advantage of the possibilities offered by new technologies instead of instead of retrofitting new technologies to old concepts.]

How it will be adopted

Many aspects of Decentralized Finance are still a work in progress, but it is already better than the options available to many people in countries where financial systems are underdeveloped or focused on a richer segment of the population; the key point is that it is already solving problems in the Real World (see examples below). It is completely possible that DeFi will leapfrog Traditional Finance in many countries, just like mobile phones in Africa and digital payments in China leapfrogged landlines and credit card payments, respectively. 

In rich countries, where Finance is more developed and use cases are more complex, there are still many issues to figure out, but if history teaches us anything is that the technology will keep improving and it’s possible to see how DeFi will not only replace cumbersome processes (like settlement of securitiesmore open private markets, and so on), but also expand access to the large portion of people and businesses who are still underserved even in developed economies (think of small businesses and people with lower incomes).


Here are some examples of Real World Problems that DeFi and crypto are solving today, where existing solutions are either too expensive or not available to most users who need them:

• Bitso: cheaper, faster remittances.

• USDC: saving in (digital) dollars from any country.

• CitaDAO: expanding access to real estate for everyone.

• Agrotoken: using tokenized grain as collateral to finance purchase of supplies.

• Addem Capital: tapping global sources of funding for businesses.

• Goldfinch: financing of unsecured loans on emerging markets.

• Centrifuge: much cheaper borrowing using Real World Assets as collateral. 

What’s Next

So What’s Next? Get started and use it to solve more existing real world problems, then keep improving and adding more and more use cases until the vision of Finance for everyone becomes a reality.

#defi #blockchain #crypto #web3 #finance

What comes after the crypto winter? Real World innovation

We are in a crypto winter, but builders keep building new applications using crypto-related technologies. The next wave has already started, and it is focused on bringing crypto innovations to the Real World.

What: Crypto winter before the next wave

We are in a crypto winter, and it is understandable since so far, crypto has mostly been used for speculation, not solving problems in the Real World. However, the key crypto-related technologies (blockchain, smart contracts, decentralized applications, tokenization) have the potential to remake industries (starting with Finance) and release enormous amounts of trapped value. 

If we look beyond the headlines, we can see that many applications that are already solving real problems in the Real World. If we look at the long-term trend (beyond the current volatility), we can see these technologies are categorically better and create fundamental changes for how to solve many existing processes (see examples below). In fact, this stage reminds me a lot of the conversations around Amazon (remember Amazon.bomb?) and the technology sector in 2000 after the Dotcom bubble burst (and follows the Gartner Hype Cycle almost perfectly, just as we navigate through the Trough of Disillusionment). 

Who: 2 Cryptos: Traders vs. Builders

A key insight is that there are two cryptos: financial crypto (Wall Street people, focused on trading and short-term profits) and tech crypto (Silicon Valley/engineering/entrepreneurial people, focused on building products that solve real world problems); where most people see things that don’t work, the tech crypto community see a list of things to be fixed

They key to make this work is to look for pools of trapped value where we can apply breakthrough technologies to reimagine existing processes. We start with simpler specific (and broken) use cases, and then keep on improving and adding more complex and valuable processes. 

How: Real World applications are already here, if you know where to look

We can already see many examples of applications working in the Real World – they are just not as publicized as trading and exchanges. As of today, Crypto and related technologies are already solving problems for lots of users: sending remittancesholding savings in a stable currency in unstable economiesmaking Real Estate accessibleglobal financing for Emerging Marketsfinancing agricultureaccessing global sources of capitalborrowing against Real World Assets, among others. 

What these applications have in common is that they are mostly in underserved markets where solutions with current technologies are not cost-effective or too cumbersome. And as technology keeps getting improving, we can move on to more complex problems, like settling securities trading instantaneouslytokenizing Real World Assets and adding liquidity to private markets, and so on. 

Also, we can look at other metrics that show adoption of these new technologies:
• Decentralized Finance has held up even after the implosion of many centralized exchanges
• Stablecoin usage keeps growing and now the transaction volume is higher than Mastercard and American Express
• Developers keep building new applications
• Energy requirements have gone down dramatically for the Ethereum blockchain
• And more 

What’s Next 

Crypto and crypto-related technologies are here to stay; if we look beyond the hype we can see it already working in specific industries. The key is: Focus not on going from 0 to $30B from one day to the next, but on building the products that people need.

#blockchain #crypto #defi #web3 #finance

Latin America equals (Digital) Growth

When Marc Andreessen wrote “Software is eating the World” 10 years ago, ‘the world’ usually refers to ‘all industries’. But it turns out it’s also true in the geographic sense, and Latin America is no exception.

Digital Latin America

When Marc Andreessen wrote “Software is eating the World” 10 years ago [in 2011], ‘the world’ usually refers to ‘all industries’ (which is true). But it turns out it’s also true in the geographic sense, and Latin America is no exception.

Latin America’s Digital Transformation is well underway. For specific examples, just look at Mexico today and how different it is vs. only 10 years ago where new digital entrants (many of which didn’t even exist) changed the rules of the game: think of the difference in price, selection, convenience, speed of Amazon and Mercado Libre vs. Liverpool, Uber vs. Taxis, Netflix vs. Televisa, Twitter and Facebook vs. newspapers, WhatsApp vs. SMS and phone companies, and so on. Can you imagine going back to that old world? I can’t. And it doesn’t stop there: 10 years ago there was no Conekta, Konfio, Kueski, Clip, Albo, Arcus, all of them companies solving real problems, plus many others that we haven’t heard of.

More interestingly, this Digital Transformation will only keep on accelerating. There is now a critical mass of digital and entrepreneurial infrastructure that has created a tipping point. Again, think of today vs. 10 years ago: everyone now has a smartphone, there are now several (online and offline) payment options, people now spend more time on digital than traditional media, entrepreneurs can access local and foreign VC funds – none of this was really available 10 years ago.

This is to say: A lot has been done, but there’s even more to come. Even better, we can see what’s coming. The US and the UK have traditionally been several years ahead of emerging markets, but Asia has been catching up quickly (and in some cases is ahead, like China with digital payments). Latin America has usually been a few years behind, but at every step, we could always see what would happen next with increased internet penetration (e-commerce, digital media, digital payments, smartphone adoption, and son on). So what comes next (which is another way of saying, ‘what problems haven’t been solved’)? Better, cheaper, and more accessible access to financial services, education, healthcare, day to day purchases, more transparent media – in short, many of the things that are taken for granted in developed economies.

Most of the stories in the local and international press focus on infrastructure, energy, and manufacturing, but underneath the surface there are entire industries being remade thanks to technology, and it has been improving the lives of millions of people. Most people reading this initially are probably  friends from the technology/startup/venture capital world, and will think to themselves: ‘We already know this’. But this is the irony: in certain circles (and for sure the millions of people using digital services every day), everybody knows this, but among mainstream media/traditional investors/government bodies/many international investors and global capital markets, this is not the story that’s being told.

I would even go one step further and argue that the fact that we’re not there yet is actually a good thing: this is the time to invest [‘Buy low’] before everyone else rushes in. Just like 10 years ago Software was eating the world, now Software is eating Latin America: Entire industries are being digitally remade, and this offers the greatest opportunity for growth. So remember: The real growth story in Latin America is Digital Growth.

The New Economy became real after all, part 3

“All told, listed technology firms make up more than a quarter of the value of America’s stockmarkets. The last time tech companies were so important was back in 2000, when they were briefly worth a third of the value of all listed equities in America.”

Tech companies


The New Economy became real after all, part 2

“That is the bad news. The good news is that the economy may be less volatile. A third of America’s 20th-century recessions were caused by industrial slumps or oil-price shocks, according to Goldman Sachs. Today manufacturing is just 11% of GDP and each dollar of output requires a quarter less energy than in 1999.”

New economy



In defense of proximity: Cities remain invaluable

“Cities remain invaluable as places where people can build networks and learn how to collaborate. The brain-workers now logging into Zoom meetings from commuter towns and country cottages can do their jobs because they formed relationships and imbibed cultures in corporate offices. Their heads are still in the city, though their feet are not. Even a socially distanced, half-full office is essential for teaching new hires how a company works. If offices facilitate chit-chat and gossip, they are functioning well. Answering emails can be done from home.”

Via The Economist https://www.economist.com/leaders/2020/06/11/great-cities-after-the-pandemic


In defense of proximity: Cities are machines for creating citizens

“Great cities are obnoxious, but they are normally big contributors to national budgets. And the trick they perform for their countries is not just economic. Cities are where people learn to live in a modern, open society. They are machines for creating citizens.”

Via The Economist https://www.economist.com/leaders/2020/06/11/great-cities-after-the-pandemic