Ex-investment banker: Blockchain platforms will soon surpass traditional financial services
“Bitcoin is decentralized. It can solve many issues of market volatility. Bitcoin allows corporate treasuries to manage traditional financial market turbulence in a distressed market,” emphasized Chiente Hsu, Co-Founder and CEO of ALEX, a DeFi platform. “A decentralized foundation ensures that the holders do not need to jump through all the flaming hoops associated with traditional centralized financial services.”
Hsu discussed the smart contracts that are now built on Bitcoin, with David Lin, Anchor at Kitco News. ALEX is an acronym for Automated Liquidity Exchange. Hsu is a former investment banker, who previously worked at Goldman Sachs and Morgan Stanley.
Hsu explained how smart contracts and permissionless (refers to open networks that allow anyone to participate in validating and mining transactions as well as buying, selling, and trading assets) make Bitcoin more universally accessible than traditional finance. “DeFi is built on blockchain. The most decentralized cryptocurrency is Bitcoin. The void between DeFi and traditional finance is decentralization and permissionless,” Hsu said. “The biggest risks traditional finance face are counterparty risks because of overregulation.”
“Due to counterparty risks, traditional finance needs to have much bigger balance sheets to manage those risks. But if you build a financial infrastructure out of pocket blockchain you immediately solve two issues,” Hsu added. “Number one you don’t have counterparty risk, because smart contracts are instantaneous. And number two you don’t have those balance sheet requirements.”
Speaking about adoption of Bitcoin by corporate institutions, Hsu pointed out “We are already seeing adoption of Bitcoin by corporations such as Tesla, and MicroStrategy Square, etc. And as Bitcoin now catches up on the smart contract and the application level, Bitcoin DeFi will be enormously useful for the management of corporate treasuries.”
Hsu indicated that higher bond yields may impact current bond investors. “Soaring U.S. inflation will lead to higher yields on bonds, which means that current bond holders will race to exit bonds. These treasuries will be obliged to shift to alternative asset classes such as cryptocurrencies.”
Another advantage Bitcoin has is that it’s “fundamentally regionally neutral. It is removed from regional economic policies that direct other asset classes or markets,” Hsu said.
Hsu discussed the reasons why the ongoing attraction to invest in Bitcoin is increasing. “In smart contracts, if you just use the stacking protocol (a layer one blockchain that allows for executions of smart contracts), you can get close to a 10% yield,” Hsu disclosed. “This is just stacking stats on a very secure platform. These are very interesting yields you cannot ignore if you are managing money for retirees like teachers or firemen. You must make the money work.”
Continuing to speak about why Bitcoin is a good platform for smart contracts, Hsu explained, “Bitcoin is the original blockchain. It was built to be the digital gold. It was built to be a shared ledger to send and receive transactions. It was built to be very resistant to change. That’s why we think that a financial infrastructure or an application like ALEX should be built on Bitcoin. In finance, you must be very boring. You can’t be that exciting, because you are investing people’s money.”
“Security and transparency are of paramount concern to investors. Bitcoin is the most decentralized and mutable blockchain in existence,” Hsu emphasized.
Hsu advises people interested in Bitcoin to be investors, not traders. “Stay in it for the long-term because we are still very early in the crypto adoption space. Be an investor, not a trader. Learn from history,” Hsu stressed. “Figure out how you want to diversify your holdings and stick to your target. Don’t be emotional, don’t let emotions override your decision making.”
For more on Chiente Hsu’s views on the differences between Blockchain and traditional finance, please watch the full video above.
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