Author: Will Wang, Partner at Generative Ventures Source: X, @willwangtf
Remember writing a year ago that if Ethereum and other public chain ecosystems do not take positive action, then this round of bull market will only be a BTC bull market; and the recovery of asset prices does not depend on the development of so-called Web3 Internet applications, but on the reshaping of credit. Therefore, the passage of ETFs has given mainstream assets recognition again. The first wave of so-called Mass Adoption will be to invest in ETFs through bank and brokerage accounts with qualified investment thresholds, rather than the third-generation Internet expected in the Web3 era, or large-scale users to obtain crypto assets through a simpler wallet experience; ETFs are just the first step in the Mass Adoption of crypto assets as a financial asset. An inappropriate metaphor, the Xinhai Revolution was not thorough, and the people were not fully mobilized to participate in the revolution.
At this moment, I want to write this article to talk about the so-called fancy tracks that can be recited by heart, such as "re-staking, LSD, modularization, AI, DEPIN, Parallel, Bitcoin Layer 2" (but outsiders are actually getting more and more confused and unable to understand, which also leads to the PvP phenomenon of funds in the circle in this wave of market), I think the application scenarios of encrypted blockchain in the global financial industry that are truly worth looking forward to and paying attention to are also what we think. If ETF is Mass Adoption Phase 1, then what will be Mass Adoption Phase 2 in the next 5-10 years? We are trying to find the answer and throw out some ideas:
For these three application scenarios, thinking starts with how to solve the three "unfairness" at the bottom of the financial system, which are: (1) interest rate difference (2) tax rate difference (3) information difference; If there is no check and balance on these three underlying unfairness, it is enough to make people despair and conclude that the modern financial system still perfectly ensures the widening of the gap between the rich and the poor, and if nothing is done, the Internet and AI will continue to expand. The times will be more serious. This is indeed the case.
What is the interest rate difference? It is easier for the rich to obtain high-interest financial products than the poor. To give a very simple example, the interest rate level that the 1 million China Merchants Bank Golden Sunflower Wealth Management customers can obtain is higher than the products that ordinary retail investors can buy. Because for banking business, funds have a scale premium. Of course, banks cannot give the largest fund providers the highest interest rate without limit. After all, there must be corresponding assets to support such returns. But the existence of this structure is essentially because the scale effect has not been achieved technically. Once there are corresponding means to aggregate retail investors' funds and effectively distribute returns, at least it can be alleviated.
What is the tax rate difference? The poor are more likely to be exploited by the poor tax than the rich. The poor have limited options. In order to gain hope of turning over, they pay the average loss to the lottery system, especially the traditional legal and government-issued lottery, with an average return rate of 50%, and the proportion of poor people buying lottery tickets is much higher than that of the rich. Although the government distributes about 30% of the funds to civil affairs, there is still a channel cost of 15-20% in the middle, and due to various opaque and untrustworthy so-called transparency, the lottery and prize redemption process is still controversial for a long time.
What is information gap? Rich people can get effective financial information more easily than poor people. Financial information is complex, but at the same time, the financial industry is also a service industry. Information processing and services cannot be provided to all customers indiscriminately. And general customers also lack the ability to quickly and fairly help them judge which products are obviously asymmetric in risk and return. As long as it is a human service, there is the possibility of inconsistent motivations. We even think that it is not just the difference between the rich and the poor. This is a structural problem of the so-called high-information industry in the financial industry itself. It is always exploiting the information-disadvantaged in various ways.
The above references to the rich and the poor are relative, similar to the distinction between those who can make money with money and those who make money with labor in the book "Capital in the 21st Century". There is no thinking of robbing the rich to help the poor, nor is it to dig into the original sin of the rich. Instead, we are exploring the different structural differences faced by the same investment behavior, which can be solved or at least alleviated by technology and innovation. We propose the following three corresponding solutions and call on relevant entrepreneurs and financial institutions to actively interact with us:
What can bring a certain degree of interest rate fairness? Our answer is "Yu'ebao on the chain", or "interest-bearing stablecoin"; Ant Financial's "Yu'ebao" is a great invention, which perfectly combines the income of money market funds and the use of cash, and realizes it through an Internet-based wallet payment tool. Anyone, especially those with less assets, can also be free from the dependence on cash and the inability to obtain products with basic interest rates; the huge profits of stablecoin issuers are also indirectly calling for innovation and competition, of course, including the securitization of interest-bearing cash that regulators believe. But without Yu’ebao on the chain, there will be no large-scale users who will put cash on the chain or use it for small payments; traditional Yu’ebao has proven that this is a way for hundreds of millions of people to hold assets = mass adoption potential
What can bring a certain degree of tax fairness? Our answer is "0 tax welfare lottery", or "on-chain fully transparent prize pool settlement system";How to achieve a settlement system for random game products with extreme transparency, extreme openness, extreme return rate, and extreme participation rate? The lottery and winning are both realized on the chain, and real small bets are realized to minimize the friction of gasfee? Even the social welfare funds generated, can there be a real DAO to publicly vote and govern to decide the donation objects and amounts of the funds? This is a field with a global legal market size of 300-500 billion US dollars. = mass adoption potential
What can bring a certain degree of information fairness? Our answer is "trusted AI-driven information services"; the idea of this part is still relatively preliminary, but we believe that the dance between AI and cryptography will definitely not stop at memeing the hottest fields in AI one by one in the crypto circle. The new generation of AI can achieve "scaled personalized services", so is it possible for AI to solve the personalized services that were originally not scalable in the financial field? At the same time, AI also represents a possibility that can be solved without human manipulation or selfishness, can provide advice more fairly, and should play a significant role in helping customers examine the obvious risk-return asymmetry in certain structured products. In addition to the two business models of banks and payment networks, information services are among the top ten financial listed companies in the world, which is a huge opportunity. = mass adoption potential
Can answering these three questions bring more users on the chain?
"What if holding cash on the chain means holding income?"
"What if there are no opaque games, card draws, and lotteries in the world?"
"What if there are no financial products and services that I don't understand?"
In our opinion, the Own in the Read Write Own idea proposed by Chris Dixon of a16z is still an elitist thinking. It may only be a kind of technical sovereignty for Internet property owners, but it cannot really propose how to build a Pareto-improved financial system. Otherwise, it may lead to more serious unfairness due to stronger ownership, and there will be no possibility of widespread participation; although the exciting gambling games in this industry attract people, we also clearly see that this cannot represent the interests of the majority of people, so how can we talk about mass adoption?
Therefore, we hope to add a fourth word after Read Write Own: Fair! In fact, this is not our invention at all, but an ideology that has been widely recognized in this industry, and words like fair launch have become part of the consensus. FairFi is moving towards a more universal and fair financial system, and truly serving the financial improvement of hundreds of millions of users around the world. This article was written between the trip to Hong Kong and Dubai. In these two most financial cities, the proposition of fairness is raised in the hope that the situation that can be formed in the industry in the long run is that good money drives out bad money, not the other way around.
What is freedom? There are options
What is financial freedom? Better options than traditional finance.
JinseFinance
Alex
Huang Bo
Hui Xin
Twitter
Bitcoinist