Beyonce and Monet: the first mass market app for DeFi

Over the last few months, the Decentralized Finance ecosystem has grown at an impressive pace: every single metric you can look at shows double digits growth on a month by month basis.

DeFi Users over time – source: Dune Analytics

This is a great achievement, but it is a fact that so far speculation or high risk financial incentives have been the main adoption drivers for Defi (and the wider crypto space). This isn’t negative per se, as it led to the creation of interesting applications and facilitated the evolution of a proper ecosystem, but this is not enough to get to 100 million users. To get to 100 millions users a new set of use cases must be developed. The argument of this post is that DeFi has a great opportunity to build products in fringe alternative asset classes, in particular music royalties and art.

Fringe alternative classes today

In a world where interest rates are sub-zero, single digits return asset classes are extremely interesting for investors. In this scenario, music royalties and pieces of art – with a total asset base estimated north of $ 3T – are becoming more and more appealing for investors.

These “creative asset classes” are dominated by institutional or hyper-wealthy investors, with essentially no access for retail investors. A Robinhood for art and music asset classes simply doesn’t exist. Some marketplaces in these spaces ( for art or for music, Otis for collectibles) are live but they present some clear entry barriers: fractional ownership is not always guaranteed, their catalogue is limited, they are invitation-based and not open to the wider market.

Music, Art and Blockchain

Music and Arts are not new problem spaces for blockchain, as many projects have been focused on innovating those two domains using DLT applications.

On the music front, there are various companies that are re-imagining how the music industry can be improved. Noticeably among them is Paperchain – a payment solution that shortens the payment cycle for creators, based on their streaming stats. 

On the art scene, NFTs are probably the hottest thing in crypto today. Non Fungible Tokens are unique and not interchangeable tokens, the opposite of cryptocurrencies where every token is interchangeable and not unique. NFTs have been used to create digital scarcity in several specific applications that require unique digital items like crypto art (Cryptopunks), crypto-collectibles (CryptoKitties) and crypto-gaming.

An example of Cryptokitties

Over the last 6 weeks a number of incredible deals took place, with thousands of Eth (millions of $) spent to buy NFTs from groups of digital artists and the NFTs asset category really taking off (you can find an overview of the topic here). 

Four of the Hashmask NFTs sold last week

These new projects are tremendously cool and highly innovative: they are exploring the concept of value in relation to physical objects and their ideal counterpart (ideal in Platonic terms), and are pushing the frontier of arts and capitalism to unexplored territories.

Anyway they are complex products: hard to discover and even harder to understand, far removed from our neighbours, the Joes and Janes on planet Earth. I’m sure NFTs will grow exponentially and will probably be the coolest thing in crypto in 2021, but they won’t drive mass market adoption – if not for other speculative reasons.

A mass market approach

Imagine a scenario where a popular crypto aggregation point with a wide distribution (an exchange/wallet like Coinbase or Argent) decides to onboard a new type of tokenized asset: the streaming royalties of the latest Beyonce album.

This token will probably be an ERC20 compatible token that can be traded over the Ethereum blockchain. Based on the number of Spotify streams the token will generate a steady cash flow over time, and the same asset could eventually be used on Aave, Compound, MakerDao to get a loan.

An hypothetical Beyonce token on Coinbase

My sense is that a number of elements could make this feature a mass market one:

  • Better UX: considering the amounts of barriers to entry to the art/music marketplaces presented above, it would be much easier for Joe or Jane to download Coinbase and buy the Beyonce album token in a few taps. This token would promise higher returns than the vast majority of asset classes today, it would be much more liquid than an investment on Royalty Exchange and could be used to get access to other financial products (it could be a potential collateral).
  • Better distribution: Coinbase is a fairly popular app, so it wouldn’t be too problematic for the average investor to get the news that it is possible to buy a Beyonce token.
  • Emotional attachment: fans would be in a unique position to show their affection and support to their favourite artists, this would create a bondage with the product that cryptocurrencies will never achieve at scale. This feature would move crypto beyond arbitrage and utility, towards a more popular movement (not far from what happened two weeks ago with Gamestop and r/Wallstreetbets)


What DeFi and the decentralized finance movement achieved so far is incredible, but this is still a tiny fraction of what traditional finance moves every day. To attack the traditional financial system I believe that a typical strategy of the classic startup theory should be followed: optimise for an underserved niche, dominate that segment and then move on to the next one, one by one till conquering the entire financial space. 

Especially in a post-pandemic world that craves owning emotions, Arts and Music could be powerful hooks.

Thanks to my friends Angelo Min Tagliabue and Luca Cosentino for their kind and extremely valuable review of this post.


Bitcoin and the hierarchy of money

Over this quarantine, I’ve decided to invest some time in a renowned Coursera course on Banking. The course is great and one of the core concepts of the class is the Hierarchy of Money. Being myself very interested in cryptocurrency, I’d like to explore in this post where Bitcoin sits in this hierarchy.

First of all, what is the hierarchy of money?

Even though every dollar looks the same, not every dollar has the same value. To fully understand this we have to first clarify a core concept: every dollar is essentially a promise to pay from somebody, an IOU. The more this debtor is trustworthy, the more your dollar has value.

Thus the hierarchy of money can be thought of as a multi-tiered pyramid where the tiers represent IOUs (promises) with differing degrees of acceptability.

Considering the Balance sheet of the institutions involved, the underlying pattern is fairly straightforward: any entry in the system is ultimately a promise to pay from somebody else, except for the central bank reserves, that represent the single trustless element in the system.

This interconnected system creates a pyramid of money and institutions which differ both qualitatively and quantitatively.

It is usually possible to move from one layer to the other paying a discount (exchange rate, par rate, interest rate). Actually, in periods of boom, credit is perceived as valuable as dollars and this discount goes to zero. But during a crisis, the situation changes brutally, and it might be even impossible to move up in the hierarchy (if nobody wants to buy my credit, I can’t convert it in any more liquid form of money).

The international hierarchy of money | Download Scientific Diagram

A fundamental property of the hierarchical system is that, as currency demand goes up and down, supply can be adjusted elastically through these layers without losing a component of discipline (at the end of the day, you have to settle your obligations).

This is probably the most important feature of our monetary system: it allows us to manage the systemic fluctuation of the money market without constant crisis. This is not a trivial property because, as Allyn Young clearly explains in this paper, before the creation of the FED, the system was totally inelastic and systemic liquidity crises were ordinary.

Where does the Bitcoin sit?

Bitcoin is a crypto currency who runs on a decentralised ledger technology and which presents one core property: it is artificially scarce, a total number of bitcoin has been planned and no other Bitcoin will be issued in the future. This scarcity is widely considered by the BTC dogmatist as the ‘killer application’ of the product, the real competitive advantage over the concurrent monetary systems.

With these concepts in mind, a few hypotheses can be made on the position of BTC in the hierarchy.

Hypothesis 1 – bitcoin is not part of the monetary system, it is an asset

Bitcoin is not really an ultimate reserve of value, it is an asset. It is traded in the lower rank of the pyramid as any other security, but it doesn’t constitute the foundation of a new system.

In this scenario, BTC is not very different from other commodities: it can be seen as a safe haven, but it doesn’t ultimately represent a risk-free asset, its value depends on the market made around it.

Hypothesis 2 – bitcoin as the top of a new pyramid

This is what is mainly believed by Bitcoin dogmatists and activist investors. In this world BTC is essentially the ultimate safe haven, if there is a crisis anybody wants it because it is the most valuable asset, being at the top of a brand new monetary standard. This is a more fascinating scenario, but I believe it is very far from reality today.

Ignoring the obvious scalability issues (today around 7 transactions per seconds are guaranteed by the Bitcoin chain, orders of magnitude less than what would be needed in this eventual new world) if BTC has to become the cornerstone of a new monetary standard, this standard lacks probably the most important feature of any monetary systems: elasticity.

We find elasticity in every layer of the current monetary system: we find it in the intraday liquidity operations for settlement, we find it in the overnight repo market, we find it in the ultimate ability of a central bank to act as lender of last resort.

All the features mentioned above are very nice properties that allow the global monetary system to act as a giant settlement infrastructure, smoothly enabling transactions between agents. The same transactions wouldn’t eventually be all possible in a BTC monetary system, because that system has a cap in amount of currency available and if the demand would eventually exceed the supply, some transactions would necessarily be stopped, with consequent liquidity crises.


I believe that Bitcoin today is obviously an asset and it’s very hard to see it as the new foundation of a future monetary system, simply because there isn’t any system built around it: there isn’t a central bank which can introduce an elasticity component through credit and there aren’t transmission channels of this elasticity to the wider economy.

On the other side, there is a strong discipline embedded in the BTC design which I believe, if complemented with credit – the other crucial pillar of a sound monetary system – could represent a promising start for a new global monetary system that goes beyond the existing global dollar standard.