Blockchain is having a significant impact. What we have seen so far, if the assessment of Brain Armstrong is correct, is just the beginning.
The Coinbase CEO believes that, in the future, startups could go directly on-chain, bypassing the expensive IPO process that is presently in place.
In fact, the entire existence of the company could be on blockchain. This includes incorporation, funding, and becoming "public". Here is where we see tokenization from the start.
Naturally, Armstrong envisions that future with Coinbase being a major player. He is positioning the company for a brighter future in spite of the threats of crypto swaps being incorporated into bank platforms, something that many are discussing.
Here we see Armstrong moving his company up the ladder, getting away from the proverbial "low hanging fruit". Instead, he is concentrating on taking different aspect of TradFI and moving them on-chain.
To his credit, the Coinbase CEO is looking at things holistically. For example, he cites fundraising as a nightmare that is in dire need of revamping.
Armstrong said the current fundraising process is “pretty onerous” and could benefit from blockchain-based automation. He pointed to Coinbase’s acquisition of Echo, a digital fundraising platform that has already helped more than 200 projects raise over $200 million. The platform will initially operate independently before being integrated into Coinbase’s broader ecosystem.
This also provides access to even more capital. My view is that, as the crypto market cap grows, we are going to see the pool of available capital also increase. Consider the person who has $50K in some token that he or she might want to take profits from. This could be rolled into a new funding venture.
Multiply that across the crypto space. Consider the potential if the crypto market cap is $10 trillion instead of just under $4 trillion.
We also see smaller entities in the DeFi world cropping up. There are going to be a few of these that make people millionaires. Those individuals are the prime candidates to move their funds into something else. Perhaps it is Bitcoin or Ethereum or, just maybe, there will be more risk taken on. Either way, the wealth generated is used to produce more wealth.
One of the key obstacles is going to be the regulators. In most developed countries, we see some form of accredited investor rules. This means the vast percentage of the population is excluded from participating.
DeFi removes some of this in the sense that anyone can get involved. Of course, this is miniscule in scale and likely always will be. The fast percentage of transactions of this nature will be done under the regulatory framework that is credited, driven by large centralized institutions such as Coinbase.
The regulators always cite customer protection, something they have repeatedly proven to show failure at. However, that is the narrative presented. Personally, I think it is nothing more than regulatory capture. By having less people involved, the pool of attractive investments is open to a small group of individuals.
After all, it is likely that the gains since Coinbase went public still pale in comparison to what was made by the early, private investors in the venture capital stage. Certainly, I acknowledge they assumed much greater risk but it is something that was closed to the rest of us.
Blockchain fundraising with less stringent regulations could change this. Of course, we might see things go on-chain and the same exclusionary rules apply. There is no guarantee the government will change its stance.
