Author: Lily king of the border
About the author: as general counsel, he worked in Asia's largest alternative investment management fund with assets of more than 40 billion US dollars.He will soon join Cobo, Asia's largest encrypted asset custody platform and institutional asset management platform, as coo.
We are witnessing a wave. More and more talents from top traditional financial institutions choose to change their camp and join cryptofinance.
Jay Clayton, the former sec chairman, recently joined the Advisory Committee of fireblocks, an encryption hosting platform; Faryar shirzad, former head of government affairs at Goldman Sachs, joined coinbase in May this year,; John Dalby, former CFO of qiaoshui, also joined nydig in May.
The same thing happened in the regulatory and financial circles in Hong Kong and Singapore, and I am also part of this wave. For those who change camp, the encrypted world is like a wild west that is very different from traditional finance. It is full of unknown and hope. It is a charming opportunity to escape the involution and reshape the future.
At the same time, the influx of talents, funds and information from traditional finance will also have a significant impact on the next evolution of the encrypted world.
Many people in the traditional financial industry still accuse encrypted assets of a Ponzi scheme that will bring huge losses to the society, although there is no liar in the encrypted world that can cause greater social unrest and economic losses of ordinary people than the traditional financial elite in any financial crisis in the past.
Too profound to be understood in the 2008 global financial crisis, the Wall Street's elite subprime derivatives have dragged the world into a big bubble. When the bubble burst, the trillions of dollars were passed to the entire society through the government's bottom line.
This kind of game has been going on, and Wall Street is blowing up new bubbles again and again. Once the risk of breaking up, it will release the city through its old friends of the central bank.
Such games have dramatically magnified the inequality of wealth and made the traditional financial industry an exploiter and oppressor in the eyes of the western people. That's why there was the "occupy Wall Street" campaign in 2011 and the "short selling" hedge fund campaign launched by retail investors on reddit forum this year.
Bitcoin was born during the 2008 financial crisis and has always had its own "anti financial exploitation" narrative.
On the genesis block (the first block on the bitcoin blockchain) forged by Nakamoto Cong, the book wrote a headline in the London Times of the day:"3 January 2009 The prime minister is about to rescue the bank for the second time. "(the times 03 / Jan / 2009 Chancellor on brink of second bailout for banks) in recent years, this narrative has won the sincere belief of countless people.
In twitter and reddit, where the encryption community is active, encryption assets are seen as the banner against "corrupt Federal Reserve with unlimited water release" and "greedy and sinister Wall Street", many people say"Buying encrypted assets is a vote, not an investment".
More importantly, traditional finance is losing the younger generation.
In the traditional financial system, whoever has a large wealth base and who occupies scarce resources first will continue to obtain the maximum income, which is the reason for the continuous expansion of wealth inequality.
In such a system, young people can't see the exit and wait for the lighthouse, so they prefer encrypted assets.
Robinhood, a leading Internet brokerage dominated by young users, has 10 million users （ Robin Hood (with a total number of users of about 20 million) has invested in encryption assets. The first financial asset invested by many young Americans is not stocks, but encrypted assets such as bitcoin, Ethereum and dogcoin.
It is not just young retail investors who embrace encrypted assets, “ The rich second generation and the rich third generation are fascinated by encrypted assets.
They have wealth that society envies, but they also bear great pressure and are unwilling to live in the shadow of the previous generation. But in the traditional business field, it is difficult for them to surpass the previous generation without the resources they have to inherit.
Their previous generation often succeeded because they captured the opportunities of the times, such as real estate or the Internet. For their generation, encryption assets are an opportunity of their own times. They are the digital native generation. They can confidently say to the previous generation about the field of encryption:"I don't know how the investment return of your private banks is recently? I invested in an ugly pet in the axie infinity game a few months ago. At present, the return on investment is 600% ".
Cryptofinance is winning the hearts of the people, especially the young generation. With the occurrence of wealth inheritance, traditional finance can no longer ignore the power of encrypted finance.
In the past 15 years, my private equity fund has been very successful, managing more than $12 billion in assets. We can make money because emerging enterprises need to invest a lot of capital in the development process.
This is particularly obvious in the development of Internet platform enterprises. They need to constantly invest in servers, hire more and more large teams, and win users through money burning subsidies. Therefore, equity capital must be introduced round after round.
In this process, their valuations continue to improve, and finally the equity capital can exit at a high level when it is listed. However, we see that the platform level application of blockchain does not need such a capital operation mode to develop.
Bitcoin has not been financed. It is completely built in a decentralized way. Nakamoto, the founder of bitcoin, disappeared after giving the world a proof of work mechanism (workload proof), but this mechanism is enough for countless people around the world to join in maintaining the network ， Become a transaction verifier, promote the circulation of bitcoin, develop applications similar to lightning network, and jointly build bitcoin into a trillion dollar market value super network.
After that, Ethereum or polygon, the smart contract platform, also developed in a similar way. They only need a small amount of start-up capital, and then they can develop into a global network with decentralized power based on POW or POS (pledge certificate) mechanism.
Compared with the previous generation of Internet platforms, blockchain platforms do not rely on traditional financial capital to support their development.
In the traditional financial system, private equity funds have advantages beyond the reach of the public. Private equity funds can use their own industry information, capital and resource advantages to obtain equity before a good company is listed. If the public participates in the listing of a good company, it will pay a lot of premium higher than the primary market.
The blockchain platform is an open system. Anyone can provide computing power and authentication support for the network through mining or pledge, and obtain a pass with a certain equity nature （ Token) reward, anyone can participate in the early construction and share the success of the platform.
The core functions of traditional finance, from asset trading to lending, are being decentralized （ Defi challenge.
In decentralized exchanges, such as uniswap and sushi, all assets traded come from users. The users who provide them with assets are called LP (liquidity provider), which can be divided from the transaction fees charged by the exchange.
The role of LP is similar to that of the market maker of traditional exchanges, both of which provide liquidity for the exchange, but the market maker of traditional exchanges is a designated institution with the highest qualification, and anyone can be the LP of decentralized exchanges.
In decentralized lending platforms, such as AAVE and compound, investors can get much higher interest than bank deposits, and borrowers can get funds here much faster than bank loans. They rely entirely on smart contracts written automatically to gather resources and demand at both ends of the loan, set interest according to the supply and demand status, and control risk through excess mortgage.
These defi platforms use blockchain based smart contracts to complete the core functions of traditional finance. They do not need the bloated organizations, cumbersome processes, hungry intermediaries and expensive and luxurious office buildings and outlets common to traditional financial institutions.
At the same time, their mechanism makes all builders and users form a dynamic community of interests. That's why former sec chairman Jay Clayton said:"It is almost inevitable for financial institutions to be transformed by blockchain".
If people in the traditional financial industry break away from prejudice and study encrypted finance with a humble attitude, it is difficult not to be convinced by the creativity of encrypted finance. Therefore, traditional financial talents and capital are rapidly pouring into the encrypted world. They not only strengthen the momentum of the encrypted world, but also help the encrypted world build a bridge between the virtual economy and the real economy.
We have seen that the legal and compliance talents of traditional finance are helping cryptofinance find a way to coexist with regulation.
Only by coexisting with regulation can institutional capital enter the encryption world, increase liquidity to the whole encryption market, realize the inclusive and open characteristics of blockchain and let the public enjoy the benefits brought by defi.
When the two worlds gradually expand their intersection, the biggest nightmare of camp changers is that they think they have joined a decentralized community of "heroes don't ask where they come from" composed of scientists, geeks, geeks and ordinary "code people", but finally find that they still encounter the same group of "elites" who have mixed market arbitrage into muscle memory.
When external forces are pouring in on a large scale, the most cherished ones are the original teams of the "crypto native" blockchain.
Such teams have grown up together with the encryption world. Their destiny is always tied to the blockchain. They have the respect and trust of the encryption community because of their pioneer insight and years of efforts.
Next, we will see some large encryption financial companies ripened by traditional financial capital.
However, the quantitative transaction model of traditional finance can not replace crypto native's wisdom from many bull and bear experiences and years of in-depth observation of information on the chain.
The decision-making model based on "odds" and "winning rate" of traditional finance can not replace the "heart rate" - the trend of trust and consensus that crypto native can see.
The traditional financial organization based on hierarchy and department cannot replace the distributed cooperation honed by crypto native for many years, and maximize the ability of community creativity and diversity.
Just as the traditional literary and art circles have transformed their IP into NFT, it is difficult to shake the status of cryptopunk and cryptokitties, the top assets of crypto native IP in the field of NFT, which cannot be understood by the mainstream curators.
The scale of the whole encrypted assets is now about US $2 trillion, and the whole traditional financial assets are US $1 trillion.
Many excellent encryption teams are already trying to build a corridor bridge between the two assets. The makerdao experiment has made great progress in accepting real-world assets such as real estate as collateral. AAVE and compound build AAVE pro and compound Treasury to provide institutional customers with interest rate products with stable income.
These customized products for institutional customers to meet their compliance and workflow needs will greatly expand the lending market of encrypted assets and have become one of the catalysts for the prosperity of defi 。
The next superhero team in the encrypted world must be a team that can attract traditional capital ten times and 100 times that of encrypted capital and jointly build the wild west into a future country with the spiritual core of blockchain.
This superhero team will need the core of crypto native and traditional financial talents to work together to build bridges and bring multiplication effects to the team in the real economy.
Note: the project information mentioned in this article is only for case display and does not represent any investment suggestions. Encrypted investment is risky. Please participate carefully.