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How DeFi Can Avoid the Irrelevance of P2P Lending and Crowdfunding

To avoid the fate of other p2p projects, DeFi protocols need incentives and feedback loops so users choose open-source over closed systems.




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ask whether those people would be paying consumers in the market in the first place, or whether radio and mixtapes have been replaced by the digital substitutes of “piracy,” YouTube copyright infringement, and other modern artifacts.


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.


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.




Coinbase Debit Card Rolled Out for US Customers

Cryptocurrency exchange giant Coinbase has announced that US users can now apply to join the waitlist for its crypto-based Visa debit card. ‘Coinbase Card,’ which will work the same as any other Visa debit card on the market will permit users to make payments and ATM withdrawals without needing to move funds to a fiat […]

The post Coinbase Debit Card Rolled Out for US Customers appeared first on BeInCrypto.




Cryptocurrency exchange giant Coinbase has announced that US users can now apply to join the waitlist for its crypto-based Visa debit card. ‘Coinbase Card,’ which will work the same as any other Visa debit card on the market will permit users to make payments and ATM withdrawals without needing to move funds to a fiat bank account.

In the announcement posted on the Coinbase Blog, it was also revealed that Coinbase Card users will get the opportunity to earn up to four percent back in crypto rewards. The announcement brings the total number of countries and jurisdictions where Coinbase Card is available to just under 30.

Coinbase on a Card

Joining users across the U.K. and most of the E.U. who already have access to Coinbase Card, U.S. users can now manage their card and spending preferences directly through the Coinbase app. In addition to earning crypto rewards, which are currently exclusive to the U.S., users can also choose what cryptocurrencies they wish to spend.

The service works by instantaneously converting users’ crypto funds into U.S. dollars at the point of sale. According to Coinbase, the first approvals will be made toward the end of Q4 2020, at which point the approved users will immediately be able to use a virtual Coinbase Card before receiving their physical card within two weeks.


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Source: Coinbase Blog

An excerpt from the announcement reads:

“The introduction of Coinbase Card was a significant milestone in our efforts to create mainstream adoption of crypto as a genuine utility. Today’s announcement is another step forward in the real-world applications of cryptocurrency as it enables more options for Coinbase customers in the US to utilize their holdings.”

Crypto Exchanges Evolving

You may recall that Binance also made its entry into the card issuance space in March of 2020 when it announced the launch of the Binance Card. Like Coinbase Card, this was also a Visa debit card with aspirations of being available to users around the world, albeit with the same staggered rollout due to regulatory differences across jurisdictions.

Currently, Coinbase Card is available in Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Estonia, Finland, France, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the UK.

According to Coinbase, U.S. users will not be charged an issuance fee, but their card usage is subject to the platform’s standard cryptocurrency conversion fees.


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Uniswap Community To Distribute 5 Million Airdropped UNI Tokens

Uniswap governance proposal will distribute 5 million UNI token airdrops to over 12,619 wallet addresses with 400 tokens each.




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Uniswap’s second governance proposal will distribute airdropped UNI tokens to over 12,619 wallet addresses with 400 tokens each. The concerning wallet addresses will receive 5 million UNI token airdrops that interacted with Uniswap through a third-party interface.

Third-parties Interacted With Uniswap For Free UNI Tokens

The interaction with Uniswap was done using a third-party software that enabled contacting Uniswap through a proxy contract in a way that the wallets were visible to Uniswap. The third-party Dapps includes MyEtherWallet, Argent, Dharma, DeFi Saver, Nuo, Eidoo, Opyn, Furucombo, Monolith, and Rebalance.

As of the publication time, the number of votes seems to be going upwards at a rough 25% increase to 25.93 million in comparison to the 1.26 million votes against. A total of 40 million votes in favor are needed to pass the proposal. Voting lines will close at 8:00 am UTC on October 31.

READ  Glassnode Analyst Claims SUSHI Is Highly Overvalued Token

The idea to put forward Uniswap’s second governance proposal can be credited to Defi-based lendings and savings protocol Dharma.

The startup claims that users might have felt “left out” by the initial token distribution due to its inaccessibility, saying “The Phase determination was made based on how easy it is to programmatically hook a trading bot into them, as this is a proxy for what portion of these cohorts risk representing multiple addresses per end-user.”

Dropping Tokens For Missing Out On Techinalities

Dharma told Cointelegraph that if the votes pass, it will plan on a secondary proposal for retroactive distribution, “Should both Phases pass, we will not vote in favor of any further retroactive airdrops.”

Uniswap’s first governance vote was also initiated by Dharma. However, it could not be a success due to falling short by only 1% votes despite 98% votes cast in support of the proposal. The intention of the current proposal includes handing out airdrops that users might have missed out due to technical issues.

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Even though opposing votes are showing a considerably low result, its critiques views that a large portion of community might have opposed the proposal by abstaining themselves from voting.

#Airdrop #DeFi #DEX #Governance proposal #UNI #Uniswap


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TokenPay Payment Gateway – A Decentralised Payment Platform

The vision of TokenPay is to constitute a blockchain-based bank, covering all aspects of cryptography and security that will bring by the technology. Its cryptocurrency will use dual-key stealth addresses. These types of addresses enable the user to display or share their address publicly; however, any transaction to or from the address cannot be linked …





The vision of TokenPay is to constitute a blockchain-based bank, covering all aspects of cryptography and security that will bring by the technology. Its cryptocurrency will use dual-key stealth addresses. These types of addresses enable the user to display or share their address publicly; however, any transaction to or from the address cannot be linked back to it.

The blockchain will work with a proof-of-stake consensus algorithm, which means that anyone locking their composed coins to prove their fidelity will be honored with an annual 5% yield. What really distinguishes TokenPay from other so-called incognito cryptocurrency networks is that they will employ Tor networks for maximum security and anonymousness. As a result, this network materialized with both Tor and dual key, is profoundly serious about what anonymousness really means.

eToro Crypto

The TokenPay merchant platform is an entirely practical and easy to use payment solution that empowers businesses to accept crypto for their services. This extension enables us to assimilate an actual e-commerce website of magneto with their service. Incorporating the augmentation adds new payment option to the customer’s checkout procedure. When customer wants to make a payment, he/she will get a screen in which he/she has to do a payment and will get QR code with a wallet address.

He/she will select one of the assets that we agreed to use for payment, scan the QR, or send the right amount to the screen’s address. Cryptocurrency is a fast and forward way to pay for services. TokenPay and/or its merchant do not have the protection of our property. Once we enter your profile’s wallet addresses, the coins are sent to our wallet while paying the customer. They only conduct the transaction via their nodes so that they can connect the payment data and keep it as a track record for us.

With the help of the TokenPay Payment Gateway for Magento Store, we can start accepting Bitcoin, Litecoin and TPAY. This assimilation enables their customers to pay for services and provides us with a clear and acceptable way to track these payouts and have all we need about transactions in your TokenPay merchant account Data.

How is the TCT differ from the TPAY coin?

TCT is an ETH-based administration token, providing anything with the TPAY. With respect to the conception of the administration panel, the holder will be able to propose and vote on each situation of the product and its uplift. Even though they are the product developer, its upcoming prospects will be determined by TCT’s voting decisions.

TPAY is a cryptocurrency that was developed in 2017. More than a million transactions appeared to be refined on this blockchain without any type of security circumstance or setback.

They have already done enlargement and marketing of this blockchain and rebranded TPAY Secure. Derek was mostly fixated on adopting merchant processing. However, they think the best fortuity is a specific gaming payment gateway, such as TPAY Checkout.


TPAY Checkout is a gaming particular payment gateway, which presently backing 16 different cryptocurrencies, including the TPAY blockchain coin. There are also numerously incorporating traditional options. Work continues as they continue our industry-leading operators Gamecloud turnkey online casinos, sportsbooks, and poker platforms. The platform works well on all screens, including their mobile apps. It presently has no fee structure. The imminent authorization may regulate the direction and expansion priorities of this protocol.


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