Ethereum's DeFi Movement Is Bringing Us a New Global Financial System

When I first started taking blockchain seriously, I have to admit that Ethereum was my girl. The prospect of a world supercomputer was intuitive and obvious and transformative and so many other things rolled into one that, as soon as I finally "got it" (it took a while), I instituted a DCA investment strategy right then and there. Only problem was this was sometime in early 2017, maybe a month or two before the "fake news" of Vitalik's death flash-crashed the price of ETH.

To be honest, nearly 3 years later, we still haven't solidly pierced the low price from that day of ~$285 but the Ethereum developer community has changed tremendously for the better. The reason I drifted away from Ethereum in 2018 is the fact that there was pretty much no demonstrated use case for the chain beyond ICO's. Since 95% of those things turned out to be money grabs at best, or outright scams at worst, I had lost faith in the eth heads.

I read the Bitcoin Standard by Saifedean Ammous, got my "forever" #hodl1btc, then watched Bitcoin become the best performing asset of 2019. I'm a fucking genius, right? 😎

Then last summer a friend of mine in the industry sent me a whitepaper that was tentatively titled simply "DeFi." Now it's called FinNexus and, full disclosure, I'm advising the project, which is currently raising funds. Back then though, I had of course had a few stray MKR tokens that I got back in the bull run for cheap and I knew about DAI and the potential that was latent in the Ethereum ecosystem to setup an alternative financial system, but I hadn't really grasped what that exactly all meant until I read that FNX whitepaper. Here is an excerpt that made me open my eyes:

In the crypto economy, there exist a number of different connectivity needs. The need for connectivity between assets and blockchains, between users and blockchains, and between different service providers and their users. Currently these connections are ad hoc, unsystematic, and highly inconvenient. Instead, the connections should be unified, user-friendly, and generalizable. FinNexus is a general protocol aiming at providing those connections.

Here ‘connection’ refers not only to technological connections, but also business connections. Therefore, FinNexus is not just a technological protocol, but also a business protocol. Moreover, FinNexus is not just one protocol, but in fact a collection of multiple protocols which together compose the FinNexus ecosystem.

Since then, I've written about decentralized finance (DeFi) here, here, here, Here, and HERE.

What is so intriguing about DeFi, at least when you think about it in its purely EthFi sense, is its concept of composability or "Money Legos". It is this trait that allows decentralized financial protocols to be stacked, one upon another, in ways that are unimagined by the original creators of the protocol. It is also this trait that led to the recent bZx exploits, but that's just the price for trying to create an alternative global financial system.

In a recent piece by David Hoffman in the unparalleled Bankless Substack newsletter, the case for "Ether as a new model for money" is made. And it's pretty convincing. Among some of the great images shared in that article, to me, the most impressive is this chart comparing the growth of ARPANET in 1969 to Ethereum-based DeFi in 2019. 50 years apart and a remarkably similar trajectory.

The question is if ARPANET eventually became the Internet that we all know and love today, what is Ethereum becoming as we speak? Will there be room for other public blockchains? Or will they have to somehow figure out how to shoehorn themselves onto one of ETH 2.0's 64 shards? Will the Cosmos or Polkadot or Wanchain or Aion view of interoperability have any place alongside ETH 2.0? What the heck are we gonna even call this?

For a long time, the pundits have been calling this "The Internet of Value."

And if you follow the hype of DeFi, and its exponential growth over the next few years, you will see an explosion of disruptive innovation that we have never ever seen in the financial industry.

Posted via Steemleo