10th December 2021 > > Decentralisation.

tl;dr

Mankind will benefit from decentralisation, but hardcore crypto enthusiasts who wish for a decentralised world without USD hegemony are going to be severely disappointed.

Market Snap

Market Wrap

With risk markets shaping up for a gently positive end to the year, BTC’s lagging performance looks a little out of whack.

I have no evidence to support this thought, but perhaps we are seeing the impact of some institutional book squaring for year end?

Curious Cryptos’ Commentary – Decentralisation vs Centralisation Part 1

The crypto revolution is based upon the fundamental concept of decentralisation, something that had never been practically achieved until BTC was a few years old.

Decentralisation is an incredibly powerful force which is going to dramatically restructure everyone’s lives going forward. The obvious examples today are in the financial world and the battle that is just starting between DeFi and TradFi.

At a very simple level, getting 20% plus returns per annum by lending stablecoins almost risk free puts any TradFi product firmly in its place. Getting 1,000+% returns by taking on huge risk is simply not possible for any TradFi product.

DeFi is not yet a full-time competitor to TradFi, but it is getting there. Any traditional financial outlet – be it a retail bank, a high street, a commercial bank, a merchant bank, or an investment bank – is going to have to fundamentally change its operations and its products if it is to stay relevant in a decade’s time.

Other financial institutions – PE and hedge funds spring to mind – will have to undergo the same type of transformation if they wish to avoid being killed in the next ten years.

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Owning your own data, and monetising that data for your own financial benefit, and not to swell Facebook’s bank balance, is another obvious contender for leading the revolution as we transition to Web 3.0.

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This is the power of decentralisation.

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But I am not advocating for a fully decentralised world. I am advocating for a combination of the two, to maximise the benefits of both approaches. That is the way forward in my view, and it underpins my belief that cryptos are not a replacement for fiat, they are complementary to one another.

Curious Cryptos’ Commentary – Decentralisation vs Centralisation Part 2

Today I read an example of the complementary nature of the decentralised world and the centralised world.

Ledger is a very traditional organisation in the way it is structured. It is a limited company, with outside shareholders, a board of directors, reporting requirements, auditors and it recently went through a Series C funding round.

Ledger provides some key infrastructure to the decentralised world with its range of Ledger Nano hardware wallets. In possession of a Ledger Nano, your interaction with the crypto world is totally decentralised and fundamentally anonymous in almost all situations.

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Ledger have announced the launch of a crypto debit card allowing users to spend cryptos at various retail outlets. The card will also offer the opportunity to take out loans secured against your cryptos, allowing you to leverage your crypto position if you so desire (spoiler alert: DON’T. That’s a quick route to crypto poverty when events like the Huobi flash crash to $28k happen).

I suspect some hardened decentralisation enthusiasts will be upset with Ledger by this development, but they are the same people who see regulation as a risk to cryptos rather than as the only viable route to mass adoption.

Curious Cryptos’ Commentary – Decentralisation vs Centralisation Part 3

But to be fair, those hardened decentralisation enthusiasts (let’s call them decens) sometimes do have a point.

Opensea was one of the first, and remains one of the largest, NFT marketplaces. It suffers a little from being built on Ethereum, thus incurring high gas fees for users. Nifty’s for instance (home of my Matrix avatar NFTs) is essentially feeless being built on the Palm network.

But back to Opensea. User’s interactions with Opensea are decentralised – connect your MetaMask wallet and away you go. No registration, no login palaver, no username, no password.

But the website itself is owned and managed by a centralised (private) entity. I believe they have in the past made noises about transitioning to becoming a DAO (Decentralised Autonomous Organisation) but that is even harder to do than fully understanding what it means.

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Brian Roberts was recently appointed CFO at Opensea and appeared to imply in public comments that his main job was to take Opensea public with an IPO. With monthly trading volumes of $2bn and monthly revenues north of $50mm you can see how attractive this option might be to insiders.

This proposal caused a huge backlash and a wall of criticism from their client base, not least because of the expectation that in moving towards a DAO then users would be airdropped governance tokens as the first step in that process.

Giving value away to investment banks rather than fulfilling expectations of that value going to your customers is one sure fire way of getting people upset.

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Opensea has now completely rowed back on talk of an IPO, giving the decens a well-deserved victory.

Reserve Treasury Protocols (before they all go to zero