Productivity | Strategy | Profitability
Productivity | Strategy | Profitability
The Financial Revolution Will Not Be Televised - But Will It Be Decentralised?
King Saul led an army against the superior forces of the Philistines. Every morning and evening, for 40 days, Goliath - the 6’ 9” giant champion of the Philistines would break front lines to challenge the Israelite horde to single combat.
For 40 days and nights, King and his warriors consistently stood down in intimidation, until…David, a diminutive boy, stood up to accept the challenge. The man-child, scoffed at the offer of the king’s protective battle armour taking only his staff, his sling and five stones he found in a nearby brook.
David, the high naked, man-child sporting a staff and sling, squared off against the giant Goliath, the warrior-force that intimidated an entire legion of Israelite warriors, clad in his battle-tested battle armour, stained with the blood of vanquished foes. ”The Philistine behemoth cursed David by his gods”, (aka, threatened him to intimidate with his might and reputation), but David replies (and I paraphrase via poetic license):
”My beliefs in the way this universe works shall drive my hand to deliver the mighty blow that shall smite thee! While I pay homage to the things that belong and go to the common everyday man, the power of the collective as individuals shall rule the day!”
David hurls one of the river stones with his sling and hits Goliath in the center of his forehead. He collapses, face planted in the ground, David cuts off his head and the Philistines flee with David’s fellows in pursuit.
In the roughly two thousand, nine hundred-something years since that fabled, lop-sided upset, we see a similar surprise outcome to a competition nearly everyone thought was a forgone conclusion, as well.
In 2014, the building blocks of the more advanced portions of the crypto industry known as DeFi (decentralised finance) was the man-child David, being ridiculed by the global financial monolithic giant Goliath. In 2022, the man-child hath slung his river stone. Throughout the balance of the 2020s, witness a giant’s head be drug through the town square.
LET’S LOOK AT THE MARKET OF MONEY
The following slide is taken from marketing materials one of my companies circulated in an attempt to articulate the potential of Decentralised Finance and global P2P Capital Markets. The year was 2016, and It actually got me into a bit of trouble - for certain very influential parties called it “fraudulent”. This was likely due to an inability to see the very near future unfolding – you know, like the Luddites of England, old!
Fast forward just three and a half years, and lo and behold, I was actually (very, very) pessimistic in my estimations, and way off the mark. That is quite unusual for me, but I can always say I was trying to be conservative.
With every major economy (including the US), and many secondary and tertiary economies researching, prepping and initiating launches of their own CBDCs (central bank digital currencies, or sovereign cryptocurrencies), literally the entire economically developed world is doing exactly what I foretold in that chart back in 2016.
Let’s put just CBDCs into perspective. Daily total in USD $74,297,225,190,476 Annual total in USD $26,747,001,068,571,400
That’s $74.3 TRILLION US dollars per DAY in FX turnover value! Let me get my abacus out for annual figure…It’s also $26.75 quadrillion USD in annual FX turnover (including spot, swaps, forwards and options). This is just FX, may I remind readers. These traditional fiat currencies are rapidly being transformed into cryptocurrencies, via DLT implementations through central banks. Just imagine if someone was able to patent this stuff!
WHO ELSE IS JUMPING ON THE BANDWAGON?
Most major banks launching their own DLT (distributed ledger technology, i.e., blockchain): Goldman Sachs and USDC, J.P. Morgan and Liink/Onyx/Consensys, Swedish Central Bank and E-Krona, HSBC using R3’s blockchain…Oh yeah, and several hundred financial institutions using Ripple’s ODL (On Demand Liquidity) technology (more on this later).
Most major traditional securities exchanges are implementing, or exploring the implementation of, blockchain (DeFi) technology.
• And crypto exchanges are rapidly and handily outstripping traditional exchanges, from renaming stadiums to taking over ads at the upcoming Super Bowl, to buying into the world’s most respected business rags.
• Crypto is minting more billionaires, faster, than any other industry, ever.
• The traditional world is creating a replica of itself in the metaverse (which is why Facebook changed its name to Meta, and Square changed its name to Block, which currently derives >60% of its revenues from Bitcoin products and services).
o Metaverse - Goldman Sachs Sees the Metaverse as $8 Trillion Opportunity
o Social media is already the majority of consumed media, period, but even the disruptors are getting disrupted. There are at least five Social Networks Defending Against Blockchain Disruption
• And the IoT (Internet of Things) opting to run the DLTs, i.,e., through the metaverse
• Identity industry
• Intellectual property industry
• Real property industry
o And NFTs representing art, music, contracts, title, deeds, identity, provenance, real estate
o Retail and commercial
o Letters of Credit
• and much, much more….
You see, the Luddites are quick to maliciously label the prescient innovators as frauds and dreamers, even when the only bar to truly clear understanding is that of simple math. The modern day Goliaths are commonly thought of as the global financial and technology companies – who just so happen to be the most wealthy and powerful companies in the world.
WHO ARE THE MODERN DAY DAVIDS?
Well, at first glance, many would postulate that they are the crypto startups, but….those successful startups are now so big, as to be literally Goliaths themselves. Take a look at:
• The Digital Currency Group (majority owned and controlled by Barry Silbert) has well over 200 holdings/subsidiaries, including the largest institutional investors in the space and the largest media concern, not to mention over 29 exits/liquidity events under its belt.
• Coinbase (of which DCG is an investor) has a public equity market capitalisation of $44 billion, and the founder is a multi-billionaire.
• Binance, the world’s largest exchange by trading volume and pairs, has an ex-CEO and founder, whose net worth is nearly two and a half times that of the entire market capitalisation of publicly traded Coinbase (the largest crypto exchange in the US), above. I actually want to put the size of the wealth and capital at stake here, in perspective. The NYSE stock exchange is the largest securities exchange in the world. The founder of Binance has a personal net worth that outstrips the world’s largest (and likely oldest) “securities” exchange in the world… By over $25 billion!!!
Clearly, although the crypto industry is nascent unto itself, the main players are obviously no man-child Davids. If anything, the crypto industry is in, and of itself, a burgeoning Goliath.
WHICH BEGS THE QUESTION “WHERE IS DAVID?”
In 2013, a small time entrepreneur named Reggie Middleton (known for predicting multiple, major booms and busts, world wide) read the Bitcoin whitepaper, and was enamoured ever since. Coming from a finance, financial engineering, investment and valuation background, he decided to encode an ISDA swap agreement on the Bitcoin blockchain. This was the birth of advanced DeFi, or decentralised finance (How Reggie Middleton’s Start-up Filed for the Patent for The Future of Global Finance!).
A few months later, he applied for patent protection for his ideas and inventions – even as he was unable to raise adequate funding to run his businesses. To date, The US (US11196566) and Japan (JP6813477B2) have issued active patents covering his “DeFi”, or P2P Capital Markets inventions. The patented tech is both powerful and pervasive, and covers large swaths of traditional, centralised and decentralised finance. Here are some examples of the technologies that the patent covers.
• The Bitcoin Lightning Network
• Ethereum blockchain
• Solana blockchain
• On Demand Liquidity (such as that practiced by Ripple)
• Theta blockchain (and likely very many more blockchains)
• Popular DeFi apps such as Compound, Axie Infinity, Uniswap, etc.
• Private implementation of leading blockchains used for swaps, bonds and derivatives on or through a blockchain or distributed ledger, i.e., such as those deployed by JP Morgan and the large money center banks, and quite possibly central banks as well.
• Many integration and customisation services offered by the big four consulting firms and the Silicon Valley big tech firms
As well as those companies that use products such as these for commercial gain. To put this bullet point list into perspective for those who do not follow the industry, this is CoinDesk’s (the top media publisher in the industry) top five crypto assets, worldwide.
Despite such a monumental milestone, Mr. Middleton – or shall I say, “I”, since many are perturbed by those who address themselves in the 3rd person, has encountered nothing but stiff and staunch resistance from the Goliaths of the industry and the world – if not outright attacked by them.
• He was sued by the US Securities and Exchange Commission for fraud, in part because of the market sized calculations we just stepped through (which, in hindsight appear to make the original calculations quite pessimistic) as well as proclamations of expectations to receive international patents on P2P Capital Markets and DeFi. Hindsight, through the benefit of time passed, sheds additional light on those topics. The litigation was settled with Middleton and his companies neither admitting nor denying any wrongdoing. Luckily, we have the benefit of historical hindsight.
• His Wikipedia presence, as well as assertions of his inventing and patenting DeFi have been completely removed, despite the fact that two separate patents from two disparate (and highly respected) patent offices issued the patents. To this day, there is still no trace of Mr. Middleton, Veritaseum (his company(ies) or his inventions in his name, but credit was given to other startups utilising Middleton’s ideas four years after he patented them.
• Coinmarketcap.com, a leading cryptocurrency data provider and news site, owned by Binance, keeps a misleading and unflattering red warning sign above the page the references Mr. Middleton’s company’s token (VERI) regarding adverse litigation with the US SEC. The SEC is very aggressive and XRP, Kik interactive, GRAM and EOS (Block.one) have went through the same process, yet they have no negative warning on their pages. Note that it is my belief that several of Binance’s investments, products and services infringe the Middleton patent.
• CoinDesk, the industry’s leading media publication and news source, has ran several negative articles on Mr. Middleton and Veritaseum, such as “alleged” hacks (while other entities were hacked, my hacking was merely an allegation), suits by the SEC alleging fraud (wherein the SEC’s allegations were published in detail, but none of my answers and replies were. In addition, a search on CoinDesk’s site produced 556 stories on patents, but not one story on what is tantamount to the most important patent in the history of the industry. One may ask, “But, why in the world would that be the case?” Well, CoinDesk editors have exposure to Digital Currency Group’s (DCG) equity as part of their compensation packages. DCG’s investment and operating holdings such as Grayscale investments (the largest investor in the space with $48 billion AUM). Coinbase and 100s others are very susceptible.
WHERE DOES DEFI LEAD?
Well, as hopefully all can see, we have Goliaths poised a Davids, and Davids who may be seen by some who are not following along, as Goliaths. One thing is for sure, this industry is the fastest growing, most pervasive, most wealth generating, and likely most competitive inflection point to ever occur at a paradigm shift.
Don’t let the word “decentralised” fool you. DeFi technology is already being used by almost every major bank, brokerage and exchange in the world. Extrapolate that to central banks (CBDCs), big tech software giants (Microsoft, etc.), mobile phone manufacturers (Apple and Samsung), and just about everybody else who is anybody, and it is plain to see that the transformation we are about to witness will make the internet, the smartphone revolution and even the PC revolution pale in comparison. The only question is, will the Davids triumph, or will we fail to have a changing of the guard and be under the shadow of that giant, called “G?” EG