Alex Tapscott’s ‘Digital Asset Revolution’: DeFi for Financial Services

Alex Tapscott’s ‘Digital Asset Revolution’: DeFi for Financial Services

 

Decentralized finance (DeFi) has immense potential to transform traditional finance and financial services. According to an Emergen Research report the global Defi platform industry is expected to cross $507 billion by 2028. Moreover, the total value locked within Defi currently exceeds $75 billion, showcasing fast-paced growth compared to previous months last year.

 

Yet, DeFi’s potential may still face roadblocks by business leaders unfamiliar with the Blockchain ecosystem. This idea is highlighted in Alex Tapscott’s recent book, “Digital Asset Revolution”. Tapscott is the co-founder of Blockchain Research Institute and MD at Ninepoint Digital Asset Group, told Cointelegraph that he believes digital currencies and assets are going to be a crucial building block for a new internet, along with a financial services industry that will change business models and bring new sectors. Tapscott, however, noted that, till date very few resources are available to help organization leaders understand the relevance and potential of Digital Assets.

 

He further said: “Words like nonfungible tokens (NFTs), central bank digital currencies and stablecoins are alien to those who are not involved in the world of Cryptocurrency and Blockchain Technology. It’s our mission at the Blockchain Research Institute to illuminate the relevance potential behind different Digital Assets, explaining what these are and why people should know about them in language that is easy to understand.”

 

How DeFi is linked with the Financial Services Industry

 

In order to help its readers, understand the concepts behind DeFi, the first chapter of the book “Digital Asset Revolution” gives a broad outline of how decentralized finance could reinvent financial services industry. Tapscott begins by giving a brief overview of how DeFi is related to nine specific functions of the financial services industry: storing value, moving value, lending value, funding/investing, exchanging value, ensuring value and risk management, analyzing value, accounting for and auditing value and authenticating identity.

 

Also Read: Elon Musk Is Tesla Sells 75% Of Its Bitcoin Holdings, According To Live Crypto News

 

For example, in regard to storing value, Tapscott writes that individuals and institutions can use noncustodial wallets such as MakerDAO to act as their own banks. In terms of funding and investing, Tapscott notes that aggregators like Yearn finance and Rariable have the potential to disintermediate investment advisers and robo advisers. By giving these different use cases, Tapscott aims to point out that the lines between traditional finance and DeFi will eventually get thin as adoption rates across the globe grow. Yet, this most likely will not be the case in the immediate future, as skepticism around DeFi still remains.

 

 

Chapter one also describes how a new ecosystem of Digital Currencies and assets is emerging from the rapid adoption of DeFi. This is an important aspect of the book, according to the co-author Don Tapscott. He told Cointelegraph that the business leaders across the globe are still very much confused about what cryptocurrency represents. In order to clarify this, the book Digital Asset Revolution describes nine different digital asset classes, such as cryptocurrencies, protocol tokens, governance tokens, Nonfungible Tokens (NFTs), exchange tokens, securities tokens, stablecoins, natural asset tokens and Central Bank Digital Currencies (CBDC).

 

While each of the above mentioned nine assets are important in their respective roles, readers might be inclined towards the Digital Assets that are gaining momentum today. For example, the book features an entire chapter on stablecoins, showcasing how these hold the potential to transform legacy payment infrastructures like SWIFT.

 

Also Read: Due To Internal Conflicts, Spanish Crypto Exchange Bit2me Will Not Accept Users Of 2gether

 

This is in line with how some stablecoins function, such as Circle’s USD Coin (USDC). USDC was recently implemented by Banking Circle, a European bank responsible for cross-border payments. On the other hand, some stablecoins have also turned out to be controversial. This was witnessed following the collapse of the algorithmic stablecoin TerraUSD Classic (USTC) and its support sister token Luna Classic (LUNC). As such, readers of the book Digital Asset Revolution should still conduct their own research when looking into different Digital Asset use cases, especially considering that the sector is constantly evolving.

 

CBDCs are another interesting asset class mentioned throughout the book. Chapter four is entirely dedicated to CBDCs and features an edited transcript from a webinar hosted by the Blockchain Research Institute with J. Christopher Giancarlo, former chair of the U.S. Commodity Futures Trading Commission and co-founder of the Digital Dollar Project.

 

In this chapter, Giancarlo describes what a “digital dollar” represents, especially noting that the concept is very different from stablecoins, which are often tied to another asset of value, such as USD. Giancarlo says that a digital dollar, also known as a CBDC, has its own value. While a number of concerns still remain around CBDCs, Giancarlo also remarks why privacy is crucial in order for a digital dollar to be successful: “At the Digital Dollar Project, we believe that developing the jurisprudence around the U.S. government’s approach to commercial activity using the sovereign currency, if it’s done right, could be a feature of a digital dollar that could be superior to other global reserve currencies.”

 

The chapter on NFTs may also attract readers’ interest, given the hype surrounding the yield on these digital assets. Good Robot founder, Alan Majer, contributed to the chapter on NFTs, noting that “NFTs breathe life into digital notions of ownership”. Good Robot is a company exploring artificial intelligence (AI), robotics, Blockchain Technology and the metaverse.

 

Given this, the author points out that organization leaders must start thinking creatively about tangible and intangible property rights. For example, Majer includes a chart in a page that displays NFT use cases, one being for intellectual property. The chart states that “NFTs could potentially confer licenses or titles not just of copyrighted works but also trademarks and patents as with 3D printing design files.” Another interesting use case displayed relates directly to DeFi, as NFTs have the potential to increase the range of assets to securitize, customize and derive additional value.

 

Also Read: U.S. Charges Ex-Coinbase Manager In First Crypto Insider Trading Case

 

Digital Assets aside, interoperability is mentioned throughout chapter two of the book. According to Tapscott, interoperability is crucial for enterprise leaders to understand because this basically allows different blockchain networks and platforms to communicate with one another.

 

“Smart contract platforms must interoperate seamlessly for DeFi and other new blockchain use cases to reach their full potential,” he writes. Tapscott then writes that smart contracting platforms such as Cosmos and Polkadot were developed to eradicate this issue. Anthony Williams, co-founder and president of the Digital Entrepreneurship and Economic Performance Center, descirbes on this throughout the second chapter, explaining how Cosmos and Polkadot allow Blockchain networks to transfer value in a trustless and efficient manner.

 

Challenges of DeFi Adoption

 

While the book Digital Asset Revolution provides an in-depth outline of how different Digital Currencies and Assets associated with DeFi can impact traditional finance and financial services, Tapscott is also aware of the challenges associated with adoption and roadblocks. The author mentions these dilemmas at the end of chapter one, noting that DeFi is still in its early days and requires growth.

 

For example, he describes that Blockchain Networks powering DeFi applications still require a lot of energy. While a number of DeFi applications are built on Ethereum, data shows that Ethereum is annualized footprint in electricity consumption grew during 2021, exceeding the total electricity consumption of countries like Colombia or Czechia.

 

Tapscott also notes that governments and regulators may regulate DeFi, which could hamper its growth. Additionally, Don Tapscott mentiones that DeFi might become bigger than the billion-dollar fintech sector, if senior executives of companies in this space and intermediaries like banks understand the value of decentralized finance. “The challenge of course is that leaders of the old middle are typically last to embrace the new middle,” he said.

 

After these pointers, though, Tapscott ends his summary in chapter one, suggesting that companies that fail to implement DeFi aspects will be engulfed by “this hot new industry.” Tapscott added that releasing a book on DeFi during current bear market demonstrates a valuable lesson.

 

He said: “We are in crypto winter, which is actually the best time to drill down on ideas and get educated. Bull markets are for earning while bear markets are for learning.”