Quote from Benny Attar
Our big themes at Fin3 are (1) Financial Services are going to run on blockchain in 10 years, and (2) in the U.S., blockchain technology and crypto will eventually be regulated.
Real World Adoption of Blockchain Tech:
- DeFi has produced technology that is highly applicable to capital markets (for example, foreign exchange trading). "Automated Market Makers" or "AMM" software is a combination of (1) a program that makes markets between two assets (e.g. buy / sell ether token for a stablecoin) and (2) a pool of those two assets (e.g. ether tokens and stablecoins). This is basically the same thing as algo trading on an electronic forex platform, but done on blockchain. Of note is that AMM technology has rapidly advanced and there are some powerful, open source tech available just waiting to be applied to capital markets. This article does a great job of explaining how AMMs work, their evolution over the last few years, and the most sophisticated versions: https://bennyattar.substack.com/p/the-evolution-of-amms
Takeaways:
1) Blockchain tech offers "off the shelf" options for what used to take years and millions to build (e.g. build an f/x electronic marketplace from scratch)
2) Assets have to be natively digital (see Figure's work on digital mortgages)
3) Stabecoins are required to use this tech
Move towards a regulated crypto environment in the US - the SEC has continuously been suggesting that most tokens are securities and therefore should be regulated. This week, the SEC requested information from Grayscale (the company behind GBTC/ETHE etc) suggesting they view multiple other tokens are securities (https://www.coindesk.com/policy/2022/08/27/sec-questions-grayscales-legal-stance-on-stellar-zcash-and-horizen-crypto-trusts/)
- We think that the end result is a regulated market in the U.S.