The Financialization of Everything Will Continue
Harry Potter and The Abstraction of Value
Crypto kinda sucks. Transaction costs are expensive, the UI is shit, you make one mistake and you can lose your entire net worth - who would ever use this?
And yet the core innovation of blockchain is separate from all of the problems people have with it - you can hash a list, put that hash at the top of the next list, and keep this going forever. This provides an "immutable ledger" or a "golden record" - once data is inscribed into that list and hashed, you can't change it without invalidating the entire historical record.
Bitcoin did this with a simple list of transactions. Ethereum added a programming language on top - once code is written and deployed, it can no longer be altered (unless that functionality was built in).
This has profound implications if this property of immutability can be tied to the real world. All the problems people have with crypto today are fixable - gas fees can be, and are entering a race to zero as the cost to make your own blockchain goes to zero, UI can be improved, and new security mechanisms can be designed to prevent hacks/theft of assets. When you have the choice between two applications, of similar cost, ease of use, and security, except one provides the additional benefits of fractionalization, literal mathematical enforcement that you own what it says you own (versus someone scribbling on a paper saying "IOU"), and similar additional features, who would choose the option without them?
Here's an example. Let's say a poor farmer in Ghana would like to get crop insurance so they'll still have the capability to feed their family if there's a drought. Unfortunately, they're in Ghana, where a large amount of scams happen, and the judicial system is weak. Someone can promise them a payout if there's a drought, sign the contract, then when the drought happens say "sorry we changed our mind - don't like it? Sue us."
Versus in this immutable world, the farmer and the insurance company can say "we'll determine if a drought happens by X Y Z weather reporting services, and if there is one, a payment will automatically be sent from the escrow account of the insurance company to the farmer." Who would like to live in the first world if this second one is available?
As the world continues to go toward this future, there will be drastic changes in financial markets. Here are some specific predictions of what will happen.
Predictions
Short-Term (1mo-1yr)
The GENIUS Act passes the House and is signed into law, legalizing stablecoins (
99%-> 100%).Every bank and credit union will look into creating their own USD stablecoin and 100+ USD stablecoins exist by the 1 year anniversary of the GENIUS Act signing. (70%)
Fortune 500 companies will explore becoming "Federal qualified nonbank payment stablecoin issuers," but the majority will decide it's not worth the hassle. The more consumer-facing Mag7 will jump through the hoops to build the necessary infrastructure, but Proctor and Gamble (for example) most likely won't. (25%)
Libra is back baby! (10%)
Since they can't legally compete on providing interest, issuers will compete on rebates/sweepstakes/other promotions in attempts to get usage. Expect to see an extra 5% off your Amazon order by paying in JPMD (or using a service that will convert to the proper coin for you - this service is mildly less likely within a 1yr period). (25%)
Due to the stablecoin frenzy providing bidding pressure on Treasury Bills, 30-year rates will stabilize/go down in the short term (as I write this 30Y Treasury is 4.778%), and be lower at end of 2025. (70%)
Importantly, since the bill doesn't go into effect until 120 days after final regulations are set (or 18 months after enactment), once the bill passes there will be an initial period of a lot of hype and then nothing happening. (30%)
The CLARITY Act (or some other digital asset market structure bill) passes and is signed into law before EOY 2025. (85%)
This lays out the rules of not only primary and secondary sales of digital assets, it provides the framework of what counts as a tokenized asset (digital stocks, bonds, etc) vs. a digital asset (protocol equity, DAOs, etc). (95%)
Tokenized assets become legal under a somewhat similar framework to stablecoins. As long as you're a regulated issuer and can prove you have the stocks/deeds/item you're selling, you'll be able to issue. (90%)
A new class of assets, digital assets, will be described. These are not equities in that they entitle you to the work of other people, but they do entitle you to a fraction of the revenue/profits a smart contract protocol provides. Utility tokens get their time to shine in proportion to the value/fees they generate (90%)
Example: Someone will build a digital escrow smart contract service that combines digital tokenized deeds, Zillow pricing/data feeds, and a traditional escrow service that is not only legally binding, but is two orders of magnitude cheaper than current escrow services (0.01% of home value instead of 1%). There will be a token attached to this series of smart contracts that gives you a fraction of the revenue the service makes, automatically, directly tied to the token. (90% EOY 2030)
KYC is still mandatory to transact with counterparties who either want to buy or sell these assets. [REDACTED] is de facto federally mandated. (90%)
The final major all-round crypto bull run takes off. With actual utility and profit-sharing legalized, the "degenerate casino" of crypto finally starts to die/not reported on as much. (40% EOY 2026)
There's an argument that memecoins will stick around as a way to measure The Attention Economy (different future blog post), but since this is prima facie dystopian once the entire system is running, it's more likely that they fade into irrelevance in favor of value-providing protocols.
Medium-Term (1yr-10yr)
Some banks/smaller issuers of stablecoins will go out of their way to remain below $10 billion dollars to remain under state oversight after finding the most favorable state legislation. (40%)
Gas fees continue their race to zero. The cost of transacting with a given counterparty goes down an order of magnitude as compliance and money movement all get cheaper. (90%)
Tether goes out with a whimper instead of a bang. (51%)
With legislated stablecoins popping up, people stop using it
Exception for this is if Private Equity blows up, this also blows up Tether
A stablecoin issuer goes bankrupt, but traders forget that stablecoins have first priority claim to assets in bankruptcy above everything else. There is an extremely profitable long/short trade to make buying de-pegged USD while shorting the bank's bonds (80%)
How to guess which bank this'll be? The bank is going to be one that doesn't use the standard reserve auditing software the majority of the top 10 US banks use for their stablecoins (95%). They'll also be regulated at the state level rather than the federal (60%).
Long-Term (10yr+)
~15 years from now, you will be able to buy fractional amounts of the Dodger Stadium (entitling you to an equal % of their ticket sales), Salesforce Tower, other major landmarks/real estate. Some will provide fractional % of the revenue the building generates, some will simply be fractional ownership of something that is supposed to appreciate in value. (95%)
This will also be true for purchasing fractional amounts of music royalties (if you've been around a while you remember when the rights to the Shrek 2 royalties were sold on Public) (85%).
The abstraction of value will affect how people live their lives. (99%)
You'll be able to seamlessly pay for your Trader Joe's grocery bill in FartCoin (what you value), and the company will automatically receive an equivalent amount of GOOGL stock (or whatever Trader Joe's values). The money will sit in those denominations until it's time to pay employees, who will receive their wages automatically converted to what *they* value, and so on. (95%)
A financial institution will create "The Account™️", which is something of a combined checking/savings/brokerage/credit card/mortgage/debt tracker/financial advisor rolled into one. (90%)
"The Account" will have a number attached to your name, which is close-but-not-exactly modeled as your current net worth.
When you spend your value on items, 98.4% of the price will be deducted from your number (1.6% back in credit card rewards automatically applied as a rebate).
When you get paid via working, dividends, company transactions, or other methods, your number will automatically increase, and the value will be automatically invested in what you prioritize.
Allocating personal capital flows will continue to be for financial professionals and hobbyists. Most people will opt to have the attached AI assistant build a portfolio for them
AI to Person A: "oh you value effective altruism? Here's a portfolio investing in harm minimizing companies, with an automatic 10%/yr donation to GiveWell"
AI to Person B: "oh you value maximizing market return? here is a worldwide zero-cost index fund"
Equities exchanges move to a T+0 model of settlement. (90%)
At least one publicly listed company has real-time financials into their business (how much revenue was made that day, how much was spent on salaries, etc) (85%)
The standard of interest moves from compounding daily/monthly to compounding ~continuously (85%).
USD
You will notice I don't really mention USD in my long-term predictions. The US is on track to, within the next decade, have interest on the national debt exceed the total yearly revenue of the US. The options available to the US are to raise taxes (unpopular), cut benefits (also unpopular) or print money to pay down the debt. I'm at least at 60% we don't do either of the unpopular options.
Treasury bonds have been considered the "risk-free" rate my entire life - I don't think this moniker includes the risk of currency debasement, when alternate options for value become not only available, but the activation energy to switch approaches zero both in direct costs (fees) and indirect costs (ease of use, counterparty trust, etc). I think the signing of the GENIUS Act was short-term good for the dollar, and long-term the canary in the coal mine for this reason.
Do I think the dollar will go away? Unsure. This is too big of a problem for me to accurately predict, and the only thing I'd be confident of in any prediction is that it's wrong.
When the world reserve currency debases itself, and a single digit %+ of the population have the means to switch how they value their personal value, what happens? What do we denominate GOOGL stock in, if not USD? This is the core question to this thesis that I don't have a clear answer to.
Possible answers:
BTC. As much as I hate bitcoin for technical reasons (mathematically impossible for miners to be making a profit a decade from now, decreasing security of the network, community is unwilling to scale block size, etc), it's clear it has staying power as "the first cryptocurrency." As a friend of mine likes to say, "the terminal value of bitcoin is not zero," due to it in part becoming a religion among some subcultures.
Gold. For obvious reasons, we may want to return to the gold standard (at least until alchemical scaling works and we have infinity gold)
ETH.
[REDACTED]. This is the one I've personally chosen. IYKYK.
The answer could be all of the above, or none of them. What is clear is that when it becomes much easier to store your value, as safely as you would by the default method, some percentage of people will jump ship. The only thing I know for sure is that, at least for the next decade, The Financialization of Everything Will Continue.
Happy to answer any clarifying questions based on this model for the next couple weeks.