Fintech and DeFi Research Archive — The Fintech Blueprint

The path from institutional finance (Goldman) to enterprise blockchain (PwC) to the $26B edge of DeFi innovation (Aave) with Ajit Tripathi

In this conversation, we talk Ajit Tripathi, currently the Head of Institutional Business at Aave and a former colleague of mine at ConsenSys, about the path from traditional finance, to enterprise blockchain and “DLT” consulting, to full-on decentralized finance.

Thinking about how to connect these worlds and different available journeys? Or the timeless risks developing in tranched DeFi that look like mortgage-backed securities? We even touch on hegelian dialectics! Check out our great conversation.

decentralized finance, digital securities / STO, digital transformation, enterprise blockchain, exchanges / cap mktsLex SokolinJanuary 29, 2021ConsenSys, Aave, Paxful, Notional, Swivel

What 1840s "Free Banking" and the 1910s Cubist movement suggests about DeFi and economic machine evolution

This week, we look at:

The nature of innovation hubs, and how close groups of actors within a particular environment can be massively, fundamentally productive. Take for example the 30 million years of the Cambrian explosion.
The difficulty of experimenting with banking and money frameworks, the limits of traditional econometrics, and an overview of “free banking” in the 1840s.
How evolutionary theory can help us think about selection of economic models, and the hyper-competition and hyper-mutation that we see in crypto. DeFi protocols, like BadgerDAO and ArcX among hundreds of others, are experiments in designing different monetary policies and banking regime experiments in real time.

We have never before had such acceleration in the design space of the economic machine, subject to evolutionary pressures, built by a closely-wound nexus of developers. It is a fortune for the curious.

mega banks, central bank / CBDC, digital transformation, generational change, narrative zeitgeist, visual art, philosophyLex SokolinJanuary 25, 2021BadgerDAO, ArcX, Picasso

Embedded Finance as a $7 trillion market opportunity for banks in the business of suffering, with Simon Torrance

In this conversation, we talk all things embedded finance, platform banking, and APIs with Simon Torrance – one of the world’s leading thinkers on business model transformation, specializing in platform strategy, breakthrough innovation and digital ventures.

There’s an enormous gap between the financial needs of humanity and what the financial sector is able to deliver there. This gap is being filled by tech-savvy solutions and embedded finance plays which are putting into question the role of a bank in this new ecosystem.

embedded finance, digital transformation, China, insurtechLex SokolinJanuary 22, 2021Uber, Tencent, Standard Chartered, Affirm, Shopify

Explaining ~100x revenue multiples for Affirm, Checkout, Rapyd, and other fintech companies using systems theory

This week, we look at:

Over $1 billion in raises announced last week, and over $10 billion in Fintech company value creation: Checkout.com with $450 million at a $15 billion valuation, Affirm more than doubling after its IPO to $30 billion, lending enabler Blend raising $300 million, and payments enabler Rapyd raising $300 million.
A systems theory framework that explains the stocks and flows of goods and services, and what monetization strategies are available to fintechs
How transactional models are thriving and creating 50-100x revenue multiples

embedded finance, venture capital, paytech, monetization / commercialLex SokolinJanuary 18, 2021Checkout.com, Affirm, Blend, Rapyd, MX / Money Desktop

Who wins and loses in the Plaid/Visa divorce, and the $10 Billion in new Fintech SPACs (Spakkt and Spofi), with Will Beeson

In this conversation, Will Beeson and I break down a few important pieces of recent news — the SPACs for SoFi and Bakkt, and Plaid/Visa falling apart.

SoFi is going public with a SPAC deal worth over $8 billion. A few things we touch on in detail: (1) this is still largely a lender, (2) there is a gem of an embedded finance play called Galileo that SoFi owns, and (3) the multiple is a little over 10x T12 revenues, which is not crazy expensive, but not cheap.

Speaking of Galileo and finance APIs, we transition to Plaid, and how it is is not going to be one of the networks in Visa’s network of networks. Who wins and who loses in the equation? And last, we cover the Bakkt SPAC of over $2 billion and our view on its future.

acquisition, IPO / SPAC, embedded finance, paytech, digital lendingLex SokolinJanuary 15, 2021Bakkt, Plaid, Visa, SoFi, Galileo

How the OCC is building Crypto America and saving banks from extinction

This week, we look at:

How banks and financial advisors have failed to deliver on $1 trillion in capital appreciation for their clients over the last 12 years
The role of bank regulators in the United States, and the tensions between state and federal agencies
How the OCC is laying the groundwork for national banks to custody crypto assets, bank stablecoin reserves, run blockchain nodes, and use crypto payment networks

And instead of financial advisors or other CFAs guiding the retail market in good decision making, a newsfeed of *what’s popular* has driven Apple, Google, Tesla and the other John Galt hallucinations to the stratosphere. Don’t get us wrong. We love the robot as much as the next Fintech commentator. But it is clear to us that “the masses” are not being “advised”. And that the capital appreciation that matters — cementing the next trillion dollar networks for global future generations in work yet to emerge — is misunderstood and misrepresented by most financial professionals to their clients.

open banking / PSD2, neobank, central bank / CBDC, crypto, stablecoins, decentralized finance, regulation & complianceLex SokolinJanuary 11, 2021OCC, Treasury, IRS, BitLicense, Wyoming

Lessons for banking and finance from video game interface design

We’ve had this write-up in some various mental states floating around for a while, and better done than perfect. So treat this as a core idea to be fleshed out later.

Payments and banking companies should be looking at how people purchase and store digital goods and digital currency in video games. That experience has been polished over 40 years, and is what will be the default expectation for future generations.

For those interested, here is a website that collects user experiences of shopping across hundreds of designs.

visual art, NFTs and digital objects, metaverse, augmented realityLex SokolinJanuary 8, 2021Robinhood, Amazon, Travelocity, Fortnite, Gen Z, Wealthfront, Advizr

What do Bitcoin, Ethereum, GDP, unemployment, and Covid have in common in 2021?

This week, we look at:

The spectacular price increase in crypto assets, hitting new records for Bitcoin, as well as the comparable statistical situation around Covid cases
An explanation of the $1.5 trilion income effect in 2020, and how it has led to both capital acumulation and inequity (thanks NY Times!)
A discussion of all-time-highs and all-time-lows, why we need them, and their connections to the macro-economy, computer code, music, and the universe itself

One wonderful takeaway from Watts, which of course is not his, but beautifully plagiarized into the English language, is the duality of experience. The need for polar opposites, in a clock-like cycle. To have black, you must have white. To have the top of the wave, you need the bottom of the wave. To have a melody, you need equally the presence of the notes, and their absence in silence. To breathe in, you need to breath out. It is meaningless to have a data point without the context in which it exists.

crypto, generational change, covid pandemic, civilization and politics, macroeconomics, philosophyLex SokolinJanuary 4, 2021Bitcoin, Ethereum, Ripple, Gen Z, GDP, Modern Monetary Theory

Fintech & DeFi Research Archive🔄

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