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How DeFi Can Avoid the Irrelevance of P2P Lending and Crowdfunding

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How many Libertarians do you think there are in the United States?

Everyone, right? Everybody wants personal freedom and a limited government. Just listen to Twitter bots and the talking heads on the propaganda channels. Everybody votes their principles and is internally consistent in their logic. Long live Ayn Rand!

Lex Sokolin, a CoinDesk columnist, is global fintech co-head at ConsenSys, a Brooklyn, N.Y.-based blockchain software company. The following is adapted from his Fintech Blueprint newsletter.

The answer is … about 3% of the voting population.

About 3% of the population actually cares enough about their personal philosophy to lodge a particular vote in the direction of the Libertarian Party. We could have picked on the Green Party instead, or any other policy-oriented group, and gotten the same result. The reality is that everyone else votes Democrat or Republican because those are the teams that matter.

Everyone complains about Amazon but we all shop online. We mourn the loss of the neighborhood coffee shop but we buy Starbucks for the loyalty points. Thus the hypocrisy of human nature.

And here’s the meat: We want peer-to-peer (p2p) economies, grounded in our neighborhoods and tribes. We think Wells Fargo and Bank of America and the Federal Reserve and the rest of “them,” whoever “they” are, are centralized monoliths running on papyrus and holding back innovation.

Right. Where do *you* bank exactly?

Peer to peerless

Do we really want peer-to-peer economies, though? Or are we lost in the poetry of utopia?

Remember Napster, Kazaa and BitTorrent, with their brick-through-the-window of the media industry? Initially, the naive reaction of the labels was to build digital rights management into music players, song files and any teenager onto whom they could tattoo the letter of the law. DRM didn’t work, right?

Certainly one way to look at the explosion of file sharing is to focus on the absolute figures of people consuming media for free. The core question there is to ask whether those people would be paying consumers in the market in the first place, or whether radio and mixtapes have been replaced by the digital substitutes of “piracy,” YouTube copyright infringement, and other modern artifacts.

downloaded-qa-2013-sxsw-music-film-interactive-festival

Shawn Fanning, Napster
(Getty Images)

We don’t know the answer. We suspect, however, that if you had the patience to suffer through a DJ’s advertisements or had the time to rip tapes, you might be the kind of person who has the capacity to deal with managing the mechanics of using torrents for file sharing. The clearest formulation on this topic comes in the article “The Fifth Era of Recorded Music” from Bill Rosenblatt.

The media industry has been able to deploy a business model that uses the internet to deliver a better user experience when bundled with the law. It is a worse user experience to avoid it. DRM-free downloads have collapsed as a commercial model.

Put another way, a digital music company is as much a monopoly as its predecessor the record-label. Likely an even better one, given digital returns to scale. It is so good, that the peer-to-peer alternative loses as a value proposition.

In the same vein, it’s hard to find good data on YouTube as a facilitator of copyright breach. But we know that a lot of websites and videos contain media content a record label would otherwise try to monetize. If that media is not on Spotify, it is very likely on YouTube, accessible for free. A proxy for this content are the take-down requests under the DMCA now numbering in the hundreds of millions.

Is that piracy? Maybe. It is certainly “file sharing.” Is it peer-to-peer? Absolutely not.

Just because content is user-generated, that does not mean it is peer-to-peer. Google is the platform that mediates access and takes rent through advertising. Google is the platform worth over $1 trillion today. And this realization takes us to Lending Club.

Peerless lending

Lending Club represents an era of fintech credit. The core premise at its founding was to recreate the dynamics of the sharing and social media revolutions. Instead of mediating everything through the centralizing machine of a bank – and by the way banking licenses were sort of hard to find in 2006 – why not create a connective platform like Kazaa (a long defunct file-sharing service)? A bunch of people who need to borrow can show up with various credit risks. And a bunch of people who would like better investment returns can show up to assess those risks. And you, as the platform, take a cut.

Sound familiar? This section is a warning shot to Compound, Aave and the rest of the DeFi protocols that think that redefining technology redefines market structure, human nature and micro-economic behavior.

This section is a warning shot to Compound, Aave and the rest of the DeFi protocols that think that redefining technology redefines market structure.

The first problem is getting good risks. If you are a venue for emerging credit, the risks that come to your platform are subject to adverse selection and the lemons problem. So you need sufficient aggregation, correlated with heavy customer acquisition and branding costs, to create the asset class of reasonable credit exposure. This is also why digital asset fundraising platforms are having a hard time. Most good startups still want to raise money from Goldman Sachs, Google Ventures, and Andreessen Horowitz. Not Globacap, the investment software platform, despite such a site being a strong technical and market innovation.

The second problem is getting enough investors. Remember we started talking about Libertarians that actually vote their politics? The same dynamics are there for financial behavior. Nobody actually wants to do the homework of selecting Lending Club notes, which requires learning about credit risks and understanding complex financial geek jargon to pick an investment. And the investors you get, especially if they are retail, are lumpy and finicky. Your liabilities do not match the time horizon of thousands of people, flickering about with their needs.

By the way, this is a problem Dimensional Fund Advisors solved 40 years ago. Instead of selling its mutual funds to retail – and dealing with constant redemptions and purchases – it targeted only institutional distributors (RIAs). This strategy meant the financial product had less turnover and generated better returns. It all worked, until the ETF [exchange-traded fund] product packaging came along, which did not even require fund redemptions and purchases to take place, instead letting retail investors trade the abstraction of an index as a share.

So you soldier on and bring in hard-nosed hedge fund capital. A private equity firm here and there, to package up all those Lending Club notes and smooth out the risks. Maybe sell them downstream into fixed income funds. Of course the cost of this funding from alternative financiers is really high, because their job is to take the entire economic return and you have no pricing power. So you decide to aggregate your own capital through deposits and buy Radius bank.

See also: Lex Sokolin – The Revolution You’ve Been Awaiting: Fintech + DeFi

And then you give up on peer-to-peer lending entirely. You’re a bank now anyway. Why would you need this onerous many-to-many platform, when you can just offer some “high-yield” savings accounts.

It sucks. Peer-to-peer lending is dead. It was never going to work without a centralizing function to standardize deposits and slice up the risks. And the amount of people who “want” peer-to-peer is like the number of Libertarians. You and I still bank at the financial incumbent for 80% of our needs, and send 5% into a fintech digital lender for experimentation.

What’s the exception? What’s the Google of this world? Let’s look at our friends in China.

This geography too had a p2p lending explosion, which in large part involved fraud and bankruptcy. From the peak of 3,500 digital lender platforms, around 600 remain standing. Among them are the giants of Ant Financial and Tencent’s WeBank. The high tech platforms outlived all of the individual fintech competitors, and used their size and credibility with regulators to remain in business. Everyone else is being effectively shamed and shut down.

Returns to scale have come from being a technology monopoly. Financial features are the monetization cherry on top.

Crowdless funding

In an eerily similar fashion, the same challenge is hitting the equity crowdfunding industry. We have been bearish on these platforms because of the Libertarian (i.e., small market, low commitment) problem. The profile of a financial consumer that likes to make some-but-not-all financial decisions is a myth. The failures of Covestor, Motif, Kaching and other digital wealth platforms promoting a semi-active investing style in the U.S. highlights the problem. The U.K., on the other hand, still holds on to a functioning narrative about this sector.

Some of the early neobank players, like Monzo and Tandem, engaged with the crowdfunding market to raise single-digit million amounts from thousands of excited supporters. Those supporters were also early-users of the neobank products. The positive relationship between investors and users spun out into the story that crowdfunding is a successful economic arrangement, and that the crowdfunding platforms themselves will be the next generation of investment banking. To do this, the platforms had to do the heavy lifting to impact regulation that created operating models allowing regular people to access the venture asset class. And yet last week, Crowdcube and Seedrs (the two arch-rivals of equity crowdfunding in the U.K.) announced a 60-40 merger and a likely need for future growth equity. 

Or perhaps, unlike the media industry, the financial industry has not yet been able to deploy a business model that uses the internet to deliver a better user experience.

There are three takeaways for us. First, you have to make this market 1,000 times larger. If we were talking about a merger of £4 billion and £7 billion in revenue, rather a few million in revenue, then it would matter a lot more. One way to do that is by bypassing the geographic and regulatory boundaries under which Seedrs and Crowdcube have had to operate. This is in large part why crypto markets print large numbers – they are global, including the United States, Brazil, China, Russia and the African continent. There is always demand somewhere.

Second, the adverse selection problems remain in the asset class. Why are these unique or exciting investment opportunities? Who really cares about putting money into a local small business and facing 100% loss when you can buy Amazon stock and watch it go to $2 trillion? Who really cares about buying coffee from the local shop when they have the Starbucks app and rewards cards? If you had more investors on Seedrs, would the Silicon Valley tech players (like Slack) decide to IPO there instead of the New York Stock Exchange? You can see this same theme playing out in the acquisition of SharesPost by Forge earlier this year.

And finally, there is hope. The incentive alignment between people who crowdfunded the neobanks and then became users of those applications is profound. This is exactly the dynamic that crypto protocols have been ideating around. See this write up: “Liquidity Mining: A User-Centric Token Distribution Strategy” or the ConsenSys approach to the same problem here.

Crowdfunding works not when there is “access” but when there is something to achieve by participation. In today’s world, that something is largely financial return. To be honest, it is sometimes confounding how Initial Coin Offerings – the next generation version of crowdfunding – were able to raise $20 billion over two years. Or how Decentralized Finance, the next generation version of blockchain-based capital markets, has been able to manage a $15 billion capital base.

Perhaps the capital itself is far more risk-seeking, and is in the appropriate part of the portfolio (i.e., alternatives). Perhaps the community aspects are far stronger than in the crowdfunding model, and thus viral coefficients are higher, leading to faster social distribution. Perhaps the interoperability of issuance and trading allows for quicker monetization, and a sense that these markets are worth the trouble.

Or perhaps, unlike the media industry, the financial industry has not yet been able to deploy a business model that uses the internet to deliver a better user experience when bundled with the law. We are all still working to figure it out.

Takeaways

We are in a world where Morgan Stanley has acquired Smith Barney, eTrade and is now adding Eaton Vance for $7 billion. The esteemed institutional businesses are in the retail hen house.

That’s $1.2 trillion in assets under management in manufacturing and $3.3 trillion of assets in distribution.

In the political sense, choosing among Morgan Stanley, JP Morgan, Bank of America, and Goldman Sachs is like choosing between Democrats and Republicans. Regardless of your niche political beliefs, you should pick a party that matters – not the Libertarians. Don’t take this as a comment on the current election, in which we can say the sane choice is far narrower (self-destruction vs. attempted redemption). It is a comment on power structure and how consumers of financial services behave.

Peer-to-peer models have not become a stable market equilibrium. While p2p activity continues in media, digital monopolies wielding the law have re-emerged and are more powerful than ever. In p2p lending, the original innovators have exited the business in favor of a more straightforward, scalable solution called banking. In p2p crowdfunding, the market is consolidating and showing limited growth economics.

Is this a feature or a bug?

What we can do in the blockchain experiment is to position mutually owned protocols as market venues, such as Uniswap, Compound and Curve, and create feedback loops for both companies and users that incentivize them to choose open-source standards over closed solutions. 

But it won’t be an easy win against human nature and our collective resistance to change. Linux and Wikipedia have shown us one way. Another way is that parts of the enterprise economy find meaningful value in decentralized networks and commit not to cheat in the Prisoner’s Dilemma. Or perhaps it will be a national priority for China to integrate all economic activity into its blockchain service network, and that will be the Sputnik moment for the rest of the world.

The answer is hard to know, but we have at least articulated the outlines of the question.

Disclosure

Source: https://www.coindesk.com/how-defi-can-avoid-irrelevance-p2p-lending-crowdfunding

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XRP Bulls Step in With a 5% Daily Increase, Is $0.30 Next? (Ripple Price Analysis)

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XRP/USD – Buyers Finally Break Above Symmetrical Triangle

Key Support Levels: $0.26, $0.251, $0.245.
Key Resistance Levels: $0.261, $0.271, $0.279.

XRP went through a rollercoaster of price action yesterday as it reached as high as $0.271 (bearish .618 Fib) and as low as $0.228 (.618 Fib) during the 24 hours.

The cryptocurrency had been trading within a symmetrical triangle and rebounded from the lower boundary at the start of the week. Despite the whipsaw like movement yesterday, the daily candle still closed beneath the triangle’s upper boundary.

Today, XRP pushed higher to break toward the upside of this triangle. It reached the resistance at $0.261, provided by a bearish .5 Fib Retracement level.

xrpusd-oct22
XRP/USD Daily Chart. Source: TradingView

XRP-USD Short Term Price Prediction

Moving forward, if the buyers can break the current $0.261 level, higher resistance lies at $0.271 (bearish .618 Fib Retracement). Following this, resistance lies at $0.279 (1.414 Fib Extension), $0.286 (bearish .786 Fib), $0.295 (bearish .886 Fib), and $0.3.

On the other side, the first level of support lies at $0.26. Beneath this, support is expected at $0.251, $0.245 (100-days EMA), and $0.237 (200-days EMA).

The Stochastic RSI produced a bullish crossover signal, which helped the recent push higher.

XRP/BTC – XRP Briefly Penetrates Beneath 2000 SAT.

Key Support Levels: 2000 SAT, 1960 SAT, 1915 SAT.
Key Resistance Levels: 2050 SAT, 2127 SAT, 2200 SAT.

XRP has been struggling throughout the entire month of October against Bitcoin. Yesterday, the coin fell from 2050 SAT and broke beneath 2000 SAT. It continued to spike as low as 1915 SAT where it found support at a downside 1.618 Fib Extension.

The coin managed to close the daily candle at the 1960 SAT level (downside 1.272 Fib Extension) and it has rebounded back above 2000 SAT today as it trades at 2015 SAT.

xrpbtc-oct22
XRP/BTC Daily Chart. Source: TradingView

XRP-BTC Short Term Price Prediction

Looking ahead, if the buyers continue higher, the first level of resistance lies 2050 SAT. Above this, resistance lies at 2127 SAT (bearish .236 Fib), 2200 SAT, and 2260 SAT (bearish .372 Fib & 100-days EMA).

On the other side, if the sellers break back beneath 2000 SAT, support lies at 1960 SAT, 1915 SAT, and 1900 SAT.

The Stochastic RSI is in extremely oversold territory as we wait for a bullish crossover signal to send the market higher.

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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


Source: https://cryptopotato.com/xrp-bulls-step-in-with-a-5-daily-increase-is-0-30-next-ripple-price-analysis/

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BitTorrent Launches BitTorrent X Ecosystem Following DLive Acquisition

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BitTorrent Inc., the firm behind the massively popular BitTorrent protocol and app, has announced its acquisition of blockchain-powered live streaming platform DLive.

DLive will now form part of the newly established BitTorrent X ecosystem, which also includes the BitTorrent File System (BTFS), a service used for distributed file storage and retrieval, as well as the BitTorrent client, which will be utilized delivering these services and more to users.

Transitioning to BitTorrent X

Since the BitTorrent protocol was first developed in 2001, it has become the most successful peer-to-peer data distribution system. It has already been used by well over 2 billion users globally — including massive enterprise users like Facebook, Twitter, and Blizzard.

The BitTorrent file-sharing protocol also appears to be an inspiration that edged Satoshi Nakamoto towards the development of Bitcoin (BTC), as described in a message posted by Nakamoto on the Cryptography Mailing List.

After being acquired by TRON CEO Justin Sun in 2018, BitTorrent has gradually been woven into the rapidly growing TRON blockchain ecosystem, with the BitTorrent File System (BTFS) now being used by the TRON blockchain and DLive as a decentralized storage solution.

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With the acquisition of DLive, BitTorrent is now ready to move into the next stage of its expansion: the launch of BitTorrent X — an ecosystem comprised of BTFS, the BitTorrent (and μTorrent) apps, the BitTorrent token (BTT), and now DLive.

DLive is a leading blockchain-powered live streaming platform and currently has more than 7 million users and 200,000 content creators.

Some of its top creators include PewDiePie, tugaygokyt, and enesbatur — each of whom has hundreds of thousands of followers thanks to their popular gaming and e-sports live-streamed content.

“BitTorrent X is the next step in establishing a truly decentralized internet,” said Justin Sun, founder of TRON and CEO of BitTorrent. “In one big step, the BitTorrent X ecosystem may drive blockchain-related tools to billions of devices. Hundreds of millions of users will have access to the next era of tools to share, store, and stream their content directly to anyone across the web.”

According to the announcement, the BitTorrent X ecosystem will be powered by the BTT cryptocurrency, which is already used for incentivizing users to share their storage space on the BTFS, and can be staked on DLive to earn rewards.

justin_sun_cover
Justin Sun, founder of TRON and CEO of BitTorrent

It is expected that the arrangement will allow potentially billions of users to access decentralized file sharing and live streaming services, with the same simplicity and ease of use users expect from BitTorrent and TRON applications.

“The acquisition marks a new start for DLive.tv. We are more than excited to join the BitTorrent ecosystem as the collaboration will provide us with more innovative solutions to empower content creators and reward communities.” says Charles Wayn, CEO of DLive, “Together with the BitTorrent team, we look forward to bringing disruptive innovations to the digital media space, and furthermore create value for our global community.”

The last few months have been packed full of news coming from BitTorrent and DLive. Last month, it was announced that TRON would now use the BitTorrent File System (BTFS) as the data storage solution for TRON nodes, making onboarding new nodes to the network much simpler and faster. Likewise, DLive recently completed its 2 million Lemon #StayAtHome giveaway, helping to supports its viewers and streamers during the COVID-19 lockdown.

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Source: https://cryptopotato.com/bittorrent-launches-bittorrent-x-ecosystem-following-dlive-acquisition/

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Streamity: Leveraging Binance Smart Chain to Provide Myriad of Services

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[Featured content]

DeFi has no doubt exploded in 2020 as the industry saw unprecedented growth all the way from March. In fact, data suggests that there’s currently around $11.2 billion locked in various lending protocols in the ecosystem.

While this may have somewhat surprised many, it does come as a natural and logical extension of the crypto field. After all, that’s the general purpose of cryptocurrencies – to separate state and money through an immutable and decentralized ledger.

Expectedly, though, many companies started popping up, providing various DeFi-based services in a range of fields.

Streamity is one of those projects. It leverages the blockchain of the world’s largest cryptocurrency exchange – Binance Smart Chain, to offer a myriad of financial, healthcare, sports, and science services.

What is Streamity?

As stated in the project’s official whitepaper, Streamity is an autonomous company with a community management system built on the Binance Smart Chain. It aims at providing services in the fields of science, healthcare, finance, education, and sports.

The team builds a range of different products that interact with the Binance Smart Chain and the protocol’s native token called STM.

As the interest in the entire field is only increasing, so should the demand for the STM token. The team holds that a community-led ecosystem with constant development and self-sufficiency would be very effective. Presently, the STM token is en route to this mission, and it’s created through a governance system that would actively guide Streamity forward.

streamity_cover

More About the STM Token

Apart from the above, Streamity’s native token, STM, enables its holders to have a direct impact on the development of the ecosystem through voting. Users can easily vote for each of the proposals. They can also delegate these rights by transferring the tokens to a third party.

The minimum amount of STM tokens needed to submit a protocol proposal is 1% of the total volume of all STM tokens.

In terms of distribution, 40% of the supply will go to the community members’ public reserve – this adds up to 39.6 million STM tokens. 40% will be in free circulation, which adds up to another 39.6 million, and, lastly, 20% is reserved for team members and employees – a total of 100 million STM.

When it comes to the profit distribution, 50% goes for replenishing the public reserve, 48% goes to team members and employees, and 2% goes to charity.

Now, it’s worth noting that the public reserve will be regularly distributed by voting for grants, new liquidity pools, management incentives, and whatnot.

To incentivize early liquidity providers, 10 million STM will be allocated as a liquidity replenishment program launched on October 12th, 2020. It consists of 5 pools, namely:

  • BNB/BTC
  • ETH/DAI
  • BNB/USDT
  • BUSDT/STM
  • BNB/STM

Various Services on Streamity

Tokenomics aside, Streamity is aimed at providing a range of different services, as mentioned above. With this said, here are a few of the projects that are planned and launched.

Right off the bat, the platform has seen a P2P cryptocurrency exchange called Streamdesk that guarantees the success of the transaction through the integration of smart-contract architecture and an APY of payment systems. It’s already launched, and a transition to BSC is also in plans.

Project Health is another platform created for online training and exercises of different types with a system for sports achievements and rankings. It should be launched in the third quarter of 2021.

Duel Control is an app oriented toward entrepreneurs, middle managers, and managers. It aims at improving the development of managerial competencies, the psychology of influence, strategic thinking, and so forth. The platform should be launched this month.

The Talent Exchange Network is a platform that’s already launched, and it represents a social network with ranking systems of organizations and users, the values of which are increased through proper education.

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Source: https://cryptopotato.com/streamity-leveraging-binance-smart-chain-to-provide-myriad-of-services/

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