Why do you say that architectural gameplay has a “natural moat” in the DeFi field?

Warning: Predictive articles are often the worst kind of Substack articles because they simultaneously make grand claims about the future without modestly acknowledging the fact that no one can accurately predict the future, so in the sentence It is necessary to use the word “know”. I will split this article into two parts: what I believe is happening now, and what I believe will happen in the future.

I don’t claim to “know” what’s going to happen in the future, and given how fast DeFi is innovating right now, I don’t even want to make an assumption that I can claim to actually “know” everything that’s happening today. I’m just taking my own opinion – what’s happening now will become apparent in two to three years at best.

I am very bullish on DeFi, cryptocurrency as a concept, the increasing decentralization of major markets, institutions and the spread of global power. However, I am trying to think about the field with an incredible long-term perspective. I invite you to do the same, lest you bet on the short term and do the equivalent of selling Facebook at the IPO price.

I believe what is happening now

More broadly, global finance, institutions and governments are undergoing a fundamental global restructuring.

I’m no foreign policy expert, but it seems clear that Russia has officially ended Pax Americana by declaring war on Ukraine, and the world is about to scleroze into new trade, military, and power blocs, unlike anything we’ve seen in our lifetimes Not the same (I was born in 1993).

America seems to be in decline: the question is how fast and for how long, and what would the world look like if it persisted? Or did the Russian-Ukrainian conflict give us a taste of this? This is a dire prospect.

Companies are increasingly using their soft power to influence the public and government on a scale not previously thought of (de-platforming, denying people access to bank accounts, e.g. vague “trust and safety” teams that decide people see what, what experiences, what is “false information” and what is officially sanctioned information) and so on.

All of this is deeply worrying and changing very rapidly, a sign that we are living in an increasingly unstable and authoritarian age.

To sum up, DeFi is my main focus and I believe it is the antidote to this instability. I also believe that a lot of what’s happening in this space right now is purely speculative or driven by malicious actors, so we should try to see and understand what’s going on:

  1. Layer 1 is fighting for dominance and role in the coming multi-chain future.
  2. Hackers are jeopardizing the future, exposing vulnerabilities even before the system actually starts.
  3. Architectural play (Wormhole, Phantom, Saber, Sunny, Goki, Tribeca, Magic Eden, Metaplex) aren’t making headlines right now, but they’re actually the most fundamental areas of innovation.
  4. DeFi’s current role seems to be proving that there’s nothing special about NASDAQ or JP Morgan, when in fact these institutions are rife with decentralized, permissionless alternatives.
  5. The way to think about it is: if the price of something can be calculated numerically (that is, recorded in some private database, as is the case with almost everything), then it can be ported to the blockchain at zero cost , to create a version of the same product, price, and final asset.
  6. So (almost) everyone is trying to reinvent the “wheel” in a decentralized way, creating bonds, derivatives, equity equivalent “tokens” and other market forms that exist in traditional finance (TradFi).
  7. I don’t want to doubt the innovation that’s happening: there are platforms out there that have fundamentally reimagined finance in a good and constructive way. However, to say that we have cracked the code of a financial revolution, I think that is going a bit too far.
  8. On the other hand, I want to admit that just a few years ago, if you told anyone on the street that you could buy a digital bond backed by a blockchain that would never be shut down by any government or any central authority, they will think you are crazy.
  9. This is usually a good sign. If people will think that what you are doing now was not possible before (due to technical, cultural, political, legal or economic reasons), then you are in an innovation-driven position.
  10. NFTs went from gimmick to cultural revolution during record-breaking time.
  11. It seems to me that even those deepest in DeFi haven’t fully absorbed the financial and institutional implications of an immutable record of ownership (NFT literally means unforgeable token), and haven’t for a while. Yes, because even the most pessimistic people in the industry are shocked by the lucrative income people make from selling art.
  12. This is a controversial point, but from my standpoint, DeFi has not lived up to its promise of fully decentralized finance (as it involves people acquiring and using the applications at scale, while also replacing existing some applications). We are reaching the first point, but not yet to the point of replacing the incumbents.

I believe in what will happen in the future

Someone pointed this out to me once, and I’ll never forget – if you were betting on social media as a concept, idea, or innovation in the late 1990s and early 2000s, except for those two times, you were was wrong: the acquisition of MySpace and the creation of Facebook. Everything else goes to zero.

This is interesting because of what we now know about social media networks, namely:

  1. They rely heavily on network effects, which create an almost unbreakable moat (which is why so many projects die: they don’t build the necessary scale).
  2. They are designed to be very addictive and distort reality to keep players interested (a Facebook innovation).
  3. They usually start out as unprofitable and hard to make money (Bebo, MSN Messenger, MySpace) until they become very profitable (Facebook ads).

Many people say that the cryptocurrency revolution will happen when an application from the origins of cryptocurrency that meets the needs of a billion people is actually built. I tend to agree. We are in the “dying” phase of DeFi. My peers’ and I’s tokens have fallen over 85% since we bought in… HODL. In the blink of an eye, we are about to enter the stage of “super profit, beyond imagination”. In other words, the FAANG stage.

(Note: FAANG, namely social networking giant Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), online retail giant Amazon (NASDAQ:AMZN), streaming video service giant Netflix (NASDAQ:NFLX) and Google parent An acronym for the company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).)

What I mean by the social media analogy is that before Facebook fundamentally redesigns the entire concept of social networking by uploading people (everyone) to the internet in one representational form (the Facebook profile), there was a Huge numbers of companies rise and fall.

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

Facebook’s 11th year: every profile update over the past 10 years

Considering the above analogy, I believe what is going to happen is:

  • Blockchain will eventually become ubiquitous in society, a normal part of how business operates, with all the expectations around trust, speed and transparency that TradFi and other institutions are currently accustomed to.
  • Architectural plays will transcend any individual hype, and these will also be the most composable, like a virus, self-replication from blockchain to blockchain is the most seamless, regardless of chain popularity, market conditions or other aspects.
  • They will survive because they have inherent moats that decentralized exchanges don’t have.
  • What does composability mean, I mean one application can support many other applications with its underlying functionality. The internet is probably the purest example: it powers everything!
  • The same goes for the treasury management protocol, which has billions of dollars invested in hundreds of different applications but not directly visible to users.
  • “Composability” is to software what “compound interest” is to finance. Chris Dixon, a16z partner, once said.

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

  • Composability is a bit like the traditional American motto, but upside down – “Many from One”.
  • All other play (exchanges, bond markets, lending agreements, etc.) is fair and has the potential to be broken, forked, catastrophically failed, and quickly as Bebo did with MySpace (and then MySpace with Facebook) disappear.
  • The reason the architecture plays differently is that, unlike TradFi, DeFi users can actually buy the equivalent of financial plumbing between JPMorgan, Morgan Stanley, Goldman Sachs, and UBS (among many other analogies).
  • If the premise that the entire industry will exist and continue to grow is correct, then buying this equivalent is buying a permanent moat – natural moats are harder to fork because they have dependencies.
  • One way to measure the moat is the difficulty of replicating the second, third, and fourth order effects that are taking place.
  • This is not financial advice, buy the ever-expanding natural moats of cryptocurrencies on scalable blockchains and never sell them.

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

Take Sabre as an example

  • The liquidity pool created by Saber is at the very bottom of the stack (we call it UST-USDC). This is a first-order effect.

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

  • The second-order effect is that the protocols that generate and hold UST and USDC are now incentivized to put their capital into this pool for yield (second-order effect).

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

  • The third-order effect is that users are now incentivized to do the same, so this creates a demand for funding pools, which in turn creates more providers of dollar trades, bonds, etc. generated in two currencies (UST or USDC) or liquidity denominated Token (UST-USDC LP). If this LP token is large enough, it can provide the basis for the creation of other products (for example, USDC-USDT collateralizes the Cashio CASH stablecoin).

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

  • We created #SaberWars from TribecaDAO’s governance scale system. This means that users holding UST-USDC LP tokens can now vote to improve their economic status by increasing the yield of this pool on a weekly basis (Phase 4).

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

  • Liquidity pools are now naturally grown through third-order effects (phase five).

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

This is the so-called virtuous flywheel (Flywheel), which itself is an unfathomable moat.

Why do you say that architectural gameplay has a "natural moat" in the DeFi field?

This is a decentralized financial architecture across eras. Again, Saber is just an example of a moat and does not constitute financial advice. If you’re looking, you can find them in many places:

Solend, Saber, Sunny, Goki (no token), Quarry (no token), Phantom (no token), Wormhole (no token), Magic Eden (no token), Metaplex (no token), Allbridge and Tribeca (tokenless) are examples of this.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/why-do-you-say-that-architectural-gameplay-has-a-natural-moat-in-the-defi-field/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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