So, DPI Capital is going “full stack” or “fully stacked”, putting their money on Arch Labs and its vision that Bitcoin DeFi can compete with Ethereum. A $250,000 dollar to pick winning teams from the Keystone accelerator – talk about skin in the game. You read the headlines, you hear the hype, you start to feel the buzz and maybe even fall victim to the FOMO. But before you jump on the bandwagon, let's pump the brakes and ask a crucial question: What about the actual, tangible impact on the real world?
Freedom vs Needs Where's The Balance?
Throughout this past year we’ve been hearing that DeFi is all about “freedom” – freedom from big banks, freedom to self-custody your assets. That sounds great, right? Freedom without responsibility is a treacherous proposition. What about the needs of the everyday person, the one who isn't glued to crypto Twitter, or the one who's struggling to make ends meet?
Emily Nkrumah’s work around balancing individual freedoms with collective needs rings true especially loudly on this front. Are we really building a system that empowers everyone to use their best judgement? Or are we just paving the way toward a rich man’s techie amusement park? The potential for financial inclusion certainly is. Imagine someone in a developing country who has been excluded from the formal financial system. All of a sudden, they’re able to access these loans and investment opportunities through Bitcoin DeFi! That's an awe-inspiring vision!
Right now, DeFi feels more like a casino than a solution. Although casinos promise the possibility of life-changing windfalls, they much more frequently just leave people financially ruined.
Regulation: Is It a Necessary Evil?
Regulatory oversight of any form is anathema to many in the DeFi space, who claim it as a feature, not a bug. Is it really? I get not wanting to go down the road of heavy-handed government interference, but we are living in a blatant, exploitable Wild West right now.
Think about it: rug pulls, scams, and hacks are rampant. And who gets hurt the most? It’s the little guys, not the VCs, who really can afford to lose a few lucky bets. Ordinary folks get seduced by the siren call of easy money. Sadly, this can result in their life savings being decimated.
I’m an advocate for innovation and wish to see it flourish. We’re all consumers, and we need smart, thoughtful regulations to protect them and the ecosystem in which they operate over the long-term. It's like driving a car: you want the freedom to go where you want, but you need traffic laws and seatbelts to keep you safe.
Arch advocates the idea of “native self-custody” being empowering and inclusive. This approach removes all of the onus for security directly onto the individual. Are we really empowering individuals with the information and resources necessary to make informed financial decisions? Are we just making them more convenient prey?
Bitcoin's Environmental Shadow Looming Large
Let's not ignore the elephant in the room: Bitcoin's environmental impact.… the energy-intensive proof-of-work consensus mechanism, that’s a big deal that we shouldn’t just ignore.
While there's growing interest in using renewable energy to power Bitcoin mining, it's not a panacea. The reality is that Bitcoin DeFi, developed on top of Bitcoin, carries this environmental baggage with it. The hopeful prospect for meaningful change has finally come, and the move to a renewable energy future should be just beginning.
VCs love to talk about disruptive innovation. Unfortunately, real disruption is not a goal in itself — it’s the means to create positive change in the world. Are we truly considering the environmental impact of Bitcoin DeFi? Or are we just pretending they don’t exist to pursue profit?
DPI Capital’s bet on Arch is audacious, to say the least. It's crucial to ask ourselves: Are we building a future that benefits everyone, or just a select few? Are we really addressing the on-the-ground problems of fintech inclusion, regulatory capture, and greenwashing? Or are we just chasing the next shiny toy?
Now I’m not making the case that Bitcoin DeFi is bad as a blanket statement. It has the potential to be a great force for good. We Americans need to treat the unmet potential here with a large helping of skepticism. Here’s to our collective promise of creating a more equitable and sustainable financial system. Or, we run the danger of developing a world in which the wealthy become wealthier, while everyone else loses out. This is not fear-mongering, this is about holding people accountable and making sure innovation works for humanity and not the reverse. Let’s not allow the wonderment of shiny new technology to make us forget the mistakes we could theoretically avoid. Instead, let’s hold them accountable to more than profit, let’s hold them accountable to purpose.
