Crypto’s Overton Window, Dai Locked Up in DeFi
Reaching Acceptability
Once again this week, Argentina demonstrated to the world the need for cryptocurrencies and decentralized finance. Investors reacted negatively to primary election results that suggested a return to the populist policies that have plagued Argentinian finances.
A 15% decline in the Argentinan Peso on Monday was exacerbated by a further drop in stock prices. Those invested in Argentinian equities saw a whopping 48% one-day loss in dollar terms, and according to @theStalwart, the second worst one day fall in history:
The POV bros have an emergency podcast with MakerDAO Head of Oracles and Argentinian, Mariano Conti, who provides some on-the-ground context for crypto and DeFi in Argentina.
Hammers looking for a nail. It’s easy to overhype crypto-solutions in search of problems, but the important step for adoption is being mentioned in the conversation as a potential fix to a real problem. Little to no one is going to use Dai or even buy Bitcoin as a result of Monday’s fall, but as the currency shock permeates its way through the media and individual conversations, the ability to save in a stable currency – that happens to be a cryptocurrency – will slowly enter the conversation as a legitimate option.
In politics, its called the Overton window. That is, at any given time, politicians can only choose from a range of “acceptable ideas” that are tolerated in the public discourse. Consider the U.S., “universal basic income” and “socialism” sound less crazy to the average American in 2019 than it did in 2009. Separately, the middle ground of “acceptable policies” on LGBTQ rights has shifted enormously over the last 10 years.
Bitcoin’s Overton window has already moved from being called “rat poison” and “a fraud” by Wall Street’s most successful tycoons to now near-consistent appearances from Pomp on CNBC’s Squawk Box. And now, for those under 30, owning Bitcoin is as accepted (if not more) than owning stocks.
Facebook’s Libra announcement is already the biggest Overton window-mover of 2019. But that changed expectations for regulators, investors and other tech companies. It didn’t move the range of accepted services for new users of cryptocurrencies or DeFi applications.
Back to Argentina. The first question crypto-skeptics lob at enthusiasts is “Why do I need that?” There is no better answer to that question than Mariano Conti and others that have used Dai to shield themselves from the decline of the Argentinian peso. The story will resonate with those facing similar problems, and soon, “DeFi Lending” will be part of the Overton window range of “acceptable financial services” for many in Latin America.
Chart of the Week: Dai locked in DeFi
According to DeFi Pulse, 17% of circulating Dai supply is locked in DeFi protocols, with the vast majority deposited in Compound's interest-bearing smart contract.
Number of the Week: Profiting off of the carry
The amount of funds stored on Starbucks Cards by their customers. As JP Koning points out, this is essentially a 0% loan from Starbucks most loyal customers to Starbucks. It also underscores the opportunity from gift cards and rewards systems for crypto companies.
Tweet of the Week: Classroom Time
Teo Lebowitz highlighting an in-depth explainer video on interest rate swaps and how they could be built on chain by Allison Lu, co-founder of UMA Protocol.
Listen of the Week: Digital Fiat Currencies
On the UnChained Podcast, Laura Shin interviews Dong He and Yan Liu of the IMF on what role central banks will play in the digitization of money. With the FedNow announcement for instant payments in the US and China moving ever closer to a digital RMB, it's a good time to remember that the current monetary guardians will be active in responding to the changing landscape.
Odds and Ends
318 addresses control 80% of all Tether Link
New Youtube channel offering explainer videos on DeFi products Link
rDai (redeemable Dai) allowers users to direct generated interest to others Link
Ethfinex breaks free of Bitfinex, rebrands as DeversiFi Link
Daily volumes across five major DEXs Link
Kyber Ecosystem Report #5 (great data and analysis) Link
Thoughts and Prognostications
[UPDATED LINK] Alex Rampell: Currencies and payments have decoupled [a16z] Link
Responding to Firefox 0-days in the wild [Coinbase] Link
The future of Decentralized Finance [Linda Xie] Link
Fouda: Becoming Decentralized Enough, the Case for DAOs [Token Daily] Link
Values-based DAOs Link
DeFi doesn't matter [Evan Bayless] Link
The Nightmare of Disintermediation [Jill Carlson] Link
Did Dharma cease deposits because it was its own market maker? Link
Long Read of the Week: Deep with Nuo Network
The Defiant goes deep with Varun Deshpande, co-founder of Nuo Network. Varun talks about how Nuo's liquidation model differs from Compound and dYdX and other key DeFi trends.