The Token Disconnect: Bridging the Gap Between Blockchain and Finance

The Token Disconnect: Bridging the Gap Between Blockchain and Finance

In the world of blockchain technology, there seems to be a disconnect between its potential and real-world applications. Many view blockchain as a solution in search of a problem, with limited use cases and niche applications. The question of "For what?" remains unanswered as the decades pass by without significant progress. However, venture capitalists see crypto in a different light. For them, the focus is on returning money to their LPs, and crypto offers an exciting new financial tool for achieving that goal.

The key to understanding the venture capitalist perspective lies in the accreditation divide. The Valley's obsession with crypto tokens and the 2017 ICO mania can be attributed to the fact that these assets resemble securities without being regulated as such. This opens up opportunities for arbitraging securities regulation and provides a new avenue for financial engineering. It's like creating an option contract on a startup, allowing investors to exercise it early by selling their shares directly to the public, independent of the company's success.

The innovation in crypto assets lies not in software engineering but in financial engineering. This new financial product allows for immediate liquidity and the ability to cash out without the need for a traditional initial public offering. It's a license to print free money, with little to no enforcement against practices like insider trading, wash trading, and pump and dump schemes. This newfound freedom is enticing for LPs in large funds who see the potential for substantial returns.

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