There are a lot of reasons why DeFi may never supplant TradFi.
Decentralized blockchains are not built for speed, for one thing — and the network effects, unusually, are negative (the more people use a blockchain the more expensive the blockchain is to use).
But insisting that DeFi has to be faster and cheaper than TradFi to make itself useful is like insisting that the International Space Station be bigger and cheaper than Scott Kelly’s house.
As living quarters go, the International Space Station is small, uncomfortable, and incredibly expensive.
But it works — in outer space.
DeFi, in its current state, is similarly small, uncomfortable, and expensive.
But it works — anywhere (including outer space).
For now, that is good enough because DeFi doesn’t have to be very good to be relevant — it only has to be sufficiently decentralized to be effectively permissionless.
I think that’s worth keeping in mind as we again appear to be entering silly season in crypto.
For today’s evidence that we are really and fully back, I’ll cite ORDI, a token that expressly has no utility but gets a $1 billion market cap because people buy it simply to express their enthusiasm for Ordinals.
ORDI doesn’t help you do anything with Ordinals (or anything else) — but social consensus has decided that it should go up when Ordinals are doing well, so that’s what it does.
This is the kind of thing that makes traditional finance people despair of crypto ever becoming a serious financial system.
But remember that the fees generated from all of this silliness is what’s funding the development of a new, decentralized system — and that a decentralized financial system is worth having.
Argentines know this better than most (including most crypto people, even).
Bitcoin trading back above $40,000 has created a lot of excitement, but the difference between $20,000 and $40,000 Bitcoin is not really going to change anyone’s life.
Here, then, is the life-changing chart I think we should be more excited about:
Bitcoin hitting 16 million Argentine pesos this week is nothing to celebrate, but I do think it’s representative of why crypto matters.
Argentines protested their financial system in part by buying crypto and stablecoins.
This, I would argue, is not so different from Hong Kongers protesting their political system by downloading FireChat.
It’s real-world evidence that a financia
l escape hatch is useful — even if it’s one that gets a bit silly at times.
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