The document discusses the evolution and growth of decentralized finance (DeFi), highlighting the roles of cryptocurrency, tokenized assets, and crypto institutions in transforming financial services. It emphasizes survival factors such as understanding B2B network effects, compliance, and sustainable business models. The convergence of these elements presents challenges in adoption, governance, and regulation, with no single solution being definitive for the future.

1. Cryptocurrency & Financial Services
OPENING COMMENTS
Nov. 29, 2018

2. Introduction
Associate Director,
Strategic Advisory
(2018 – Present)
Blockchain Strategy Lead
& Vice President
(2015 – 2018)
120
clients
115
employees

3. The Evolution of Decentralized Finance
 Proliferation
 Survival
 Convergence

4. Cryptocurrency and Financial Services
What happens when an unstoppable force
meets an immovable object?

5. The Proliferation of New Species
Digital Assets Financial Services
Distributed Ledgers
a new system of record
Crypto Institutions
a new asset class
Tokenized Assets
a new issuance mechanism
Decentralized Finance
a new financial system

6. A new system of record
 Inspired by “Blockchain, not Bitcoin”
in The Economist, Oct / Nov 2015
 Permissioned, private, append-only, distributed
databases for traditional assets and systems
Distributed Ledgers

7. Survival and growth
Growth drivers
 Risk mitigation for experimentation
 Controlled phases of adoption,
participation, and integration
 Familiar governance and ownership
structure
INTERBANK
INFORMATION
NETWORK SM
Survival factors
 Understanding B2B network effects
 Shifting from “command and control”
to “participate and orchestrate”
 Asking “Do we need a blockchain?”
Distributed Ledgers

8. A new issuance mechanism
Tokenized Assets
 Derived from Depositary Receipts-based solutions
to securities settlement pilots of 2016
 Process of immobilizing and re-materializing off-chain assets as
digital tokens that inhabit permissioned or public blockchains

9. Survival and growth
Growth drivers
 Investor familiarity with underlying
assets driving inherent value
 Streamlined execution and cost
structure
 Greater access to illiquid assets and
unique financial instruments
Survival factors
 Navigating local regulatory
requirements
 Avoiding over-promises of liquidity
(and returns) to investors
 Educating investors on investment
suitability and potential risks
Tokenized Assets

10. A new asset class
Crypto Institutions
 Grew out of the exchange hack lessons of 2014
 Centralized financial institutions built to serve a new class of digital assets
by facilitating their exchange, ownership, and productization

11. Survival and growth
Growth drivers
 Sufficient scale and liquidity to meet
market requirements
 Secure, trusted fiat on-ramps
 Gradual implementation of
KYC / AML procedures
Survival factors
 Competing against “traditional”
entrants on compliance & product
 Improving user experience
 Reconciling centralized intermediary
role with a decentralized ecosystem
Crypto Institutions

12. A new financial system
Decentralized Finance
 Evolved from Distributed Ledgers, Tokenized Assets, and Crypto Institutions
 Transformation of traditional financial services into open, trustless protocols
based on decentralized networks and open-source financial primitives
Traditional Financial
Services
Lending
Derivatives
Exchange
Funds / Indices

13. Survival and growth
Growth drivers
 Permissionless, censorship-resistant
access to financial services
 Programmable instruments and
transactions with built-in escrow and
global reach
 Open-source ecosystem in active
development
Survival factors
 Finding a sustainable business model
 Achieving sufficient scale and liquidity
to support market demand
 Creating a user-friendly but secure
experience for accessing
decentralized financial services
Decentralized Finance

14. Converging on the future
Convergence points
 Adoption challenges
 Business models
 Governance approaches
 Regulatory development
No single solution can capture the future today,
but in aggregate, we may succeed

15. Contact
franklin.bi@wachsman.com