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Keegan Toci explains how smart contracts help support financial innovation
Key Takeaways
- Blockchain technology is an innovative form of database management that allows for safe, secure value transfer, and enables global commerce.
- Smart contract platforms like Ethereum have pushed cryptocurrency into the mainstream by allowing developers to build complex applications in a decentralized way, recreating traditional financial services but cutting out the intermediaries.
- The cryptocurrency space is building an ecosystem of decentralized exchanges, borrow-lend platforms, insurance, stablecoins, and other financial services that are more efficient, faster, and truly global, providing opportunities to allocate capital.
My name is Keegan Toci. I am the chief investment officer at Combine Capital. We're an asset management company specializing in digital assets. We currently offer institutions separately managed accounts with various mandates specific to the digital asset class.
The way I describe blockchain and crypto assets, the underlying technology of blockchain, is really just an innovative form of database management. And so, there are different flavors of blockchains that cater to specific use cases. But if you think about the largest crypto asset out there, Bitcoin, the underlying Bitcoin blockchain, is really good at keeping track of value transfer. And the Internet historically has been built and exceeded in information transfer, data transfer. But it wasn't technically built for global commerce. And so when you think about using blockchain technology in the Internet age, it sort of completes the construction of the Internet and allows for that safe, secure value transfer.
In terms of the technological advancements most recently that have excelled cryptocurrency into the mainstream, I think is related to the smart contract platforms. So these are the public blockchains like Ethereum that allow for much more complex applications to be built on top of them. Bitcoin does a really good job of keeping track of value transfer, but the Ethereum blockchain allows for developers to build entirely new applications in this open-source, decentralized manner. This is where you're seeing the traditional financial services stack being recreated on these various smart contract platforms. And so you have decentralized exchanges, decentralized borrow-lend platforms, decentralized insurance, stablecoins, which are dollar-pegged assets. This whole ecosystem is being built within the cryptocurrency space that is recreating traditional financial services in a decentralized manner. And when you build on a blockchain in a decentralized manner, you are removing all of the rent-seeking intermediaries. And so, an automated open-source version of finance that we know today should be more efficient, faster, truly global, and provide quite a bit of opportunity for allocating capital going forward.
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