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The financial revolution will be tokenized: Exploring the crypto frontier

July 29, 2021, 10:46 PM UTC

Fortune published a special crypto-themed issue today, a dozen stories in total. The lot—we’re calling it “Crypto at a turning point“— offers a wide sweep yet deep dive into the world of digital money.

We’ve got features on how the very best crypto investors are placing their bets and how traders get addicted to crypto’s relentless price action. We profiled top entrepreneurs, including Dapper Labs’ Roham Gharegozlou, the brain behind NBA Top Shot, and FTX’s Sam Bankman-Fried, who runs one of the hottest crypto exchanges around. And we explained the ins and outs of companies using cryptocurrency for commerce.

The package answers burning questions too. How is China’s crypto crackdown affecting the business of Bitcoin mining? Can Ethereum pull off its major software upgrade? What does Ripple’s SEC lawsuit mean for the industry at large? And why are blockchain-boosters so crazy for Wyoming?

I wrote the cover story about DeFi, or “decentralized finance.” The gist: Crypto and Wall Street are heading for collision. Software is eating finance, and mainstream financial services are likely going to look a lot different much sooner than anyone thinks. Companies—the way people have organized economically, for centuries—are giving way to a new, crypto-powered order of democratically governed computer programs. A financial revolution is here, and it is being “tokenized.”

One highlight I am most proud of is inviting pplpleasr, the defining artist of the DeFi movement, to design the issue’s cover. You can see her wild, meme-fueled, metaverse party on newsstands in days to come. We might even have some more news on that front to come too… (Special shoutout to Alex Masmej, cofounder and CEO of the “social token” project Showtime, who facilitated introductions.)

Finally, we published a completely not controversial list of the top influencers in the NFT world. The list spans celebs, who are proselytizing the tech to mainstream audiences; to artists who are doing groundbreaking design work; to entrepreneurs, collectors, and investors, who are building the infrastructure of a nascent, yet fast-rising industry. (Who did we miss?)

Helping to marshal this effort has been a highlight of my career. We hope you enjoy the issue.

Robert Hackett
@rhhackett
robert.hackett@fortune.com

DECENTRALIZED NEWS

Credits 🚀

Prices in the crypto sphere began to find their footing once again this week, with Bitcoin posting its longest winning streak in 2021 during the last week... FTX and Binance have cut how much leverage users can use to on their platforms to 20x... Average daily volume at FTX.US jumped 150x in the first half from last year... The United States Marshals Service is partnering with Anchorage to handle seized crypto assets... PayPal is getting close to launching its crypto super app... Paxos has secured a $300 million investment from the likes of Bank of America and Coinbase Ventures... Newspaper giant Gannett is bullish on the NFT market... Vauld has raised $25 million in its Series A, led by Peter Thiel's Valar Ventures... Ethereum-based video streaming platform Livepeer raised $20 million... Mark Cuban got in on AlchemyNFT's recent $6 million funding round... Fireblocks has tripled its valuation to $2.2 billion after a $310 million Series D... A bill that would block new interest accounts with BlockFi from the New Jersey Bureau of Securities was delayed another month... Custody banking giant State Street plans to offer crypto services to its private-fund clients... Shopify is now allowing NFT sales on its platform... Tesla shook off a $23 million impairment from its Bitcoin holdings in the second quarter... Jack Dorsey sees Bitcoin as a "big part" of Twitter's future.

Debits 🐻

Robinhood shares fell flat in their first day of trading... Sen. Elizabeth Warren of Massachusetts is not backing down from her calls for cryptocurrency regulations in the U.S. in order to weed out "snake oil salesmen"... Bitcoin's run-up early in the week helped cause almost $900 million of crypto short position liquidations... Only 2% of Ethereum co-founder Vitalik Buterin's $1 billion cryptocurrency donation to an India COVID-19 relief fund has been paid out... Executives at Tether are at the center of a bank fraud investigation from the Department of Justice, prompting none other than the Wolf of Wall Street to say heavier regulations are a good thing...  Congress wants crypto investors to help fund $28 billion of the new infrastructure bill... Amazon denied a report that it was exploring bitcoin payments by year end... The IMF is warning of the risks that could come from making a cryptocurrency legal tender.

FOMO NO MO

As a largely unregulated part of the economy, DeFi has exploded in tandem with demand for cryptocurrencies like Bitcoin and Ethereum. Most of the action takes place on Ethereum, the second-biggest crypto network, whose blockchain comes with a built-in programming language, Solidity, that makes it easy to build so-called decentralized apps. For now, the ecosystem is populated primarily by people who range from comfortable with to rapidly passionate about crypto—with all its risk and legal uncertainty.

But that insularity may not last. DeFi represents a concerted, crowdsourced effort to put digital coins to work, offering people financial reasons to hold crypto beyond merely speculating on price movements. Crypto "is finally not just about a new gold or a new kind of money," says Olaf Carlson-Wee, one of the crypto market's earliest major investors. He ranks DeFi as being of "earth-shattering level of importance" and adds: "This isn't just about the assets"—like Bitcoin and Ethereum—"it's about all of the financial instruments."

And that fact, in turn, could pave the way to mainstream consumption. In the not-too-distant future, people expect the Federal Reserve to decided whether to mint digital dollars of its own, or to bless such issuances by private industry. Either move could open blockchain-based services to the masses—and today's evolving DeFi infrastructure could shape a new financial order. 

From peer-to-peer lending to yield farming, our own Robert Hackett took us into the burgeoning world that is DeFi — or decentralized finance — as part of Fortune's newly released special report on cryptocurrencies. 

DeFi is a new ecosystem, one still in formation, that has inspired new thinking on what finance can look like, set off concerns in Washington, D.C., and captivated Wall Street giants fearful of being left behind by the Internet's next iteration. Said Brian Brooks, the former top banking regulator and current Binance.US chief executive: "It raises the question of whether we truly need those institutions anymore to perform those intermediary functions. ... If I were the head of Bank of America, I'd be worried." Hackett has gotten involved too, recently depositing 15 Dai into PoolTogether, a Ethereum-built app that acts like a bank in many ways and yet is anything but one.  

BUBBLE-O-METER

-8.37%

It was a rough opening day for HOOD, which closed July 29 at $34.82. Robinhood's long-awaited IPO was met with waning investor demand, even though the company prices shares at the low end of its targeted range. The stock dropped at one point early on by as much as 10% before bouncing back. 

THE LEDGER'S LATEST

Sam Bankman-Fried and the conscience of a crypto billionaire by Claire Zillman

How Caitlin Long turned Wyoming into crypto country by Maria Aspan

Ethereum risks it all on going green by Adam Bluestein

The Crypto Games: Meet the man who wants to make NFTs fun by Nicole Goodkind

Where the smart money in crypto investing is going next by Rey Mashayekhi

NFTy 50 by Fortune

Crypto traders anonymous: A new addiction takes hold for many as cryptocurrency goes mainstream by Zara Stone

Binance CEO walks back suggestion he's ready to step down from world's largest crypto exchange by Yvonne Lau

Bitcoin at $40k? Crypto jumps after signs more tech companies plan to use it by Sophie Mellor

Amazon job posting points to company's growing interest in cryptocurrency by Chris Morris

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)

MEMES AND MUMBLES

Wonder why Vitalik Buterin's been hanging out with Ashton Kutcher and Mila Kunis? The Ethereum co-founder has a role in their new animated show, "Stoner Cats," alongside the likes of Chris Rock, Seth MacFarlane, and Oscar winner Jane Fonda. Weird times. 

The latest edition of the "Kutcher Kitchen Talks" video series posted on Twitter by Kutcher himself features Buterin struggling to name a cast member of "Beverly Hills 90210". To be fair, this writer — who's the same age as Buterin — couldn't do it, either. Kunis, who held her own against her husband's crypto questions last week, had no problem with the question: Brian Austin Green.  

Interested in joining Fortune's The Ledger as a writer? We could use another pair of (diamond) hands. Contact robert.hackett@fortune.com.