If you want to get a detailed history of decentralized finance and predict where it’s headed, Graham Tonkin is a good person to talk to. The cofounder of the Stateless Money Validator, Mr. Tonkin is also a member of the StakerDAO Council overseeing the launch of the Polkadot Index Network Token (PINT). A fully decentralized, on-chain index of selected projects in the Polkadot ecosystem, PINT is suitable for investors with knowledge of top projects and blockchain but also those who want access to the rewards of top projects on Polkadot.
As the blockchain ecosystem develops it is going to foster the creation of an array of financial products indicative of a mature and functioning ecosystem, including funds offering exposure to a diversified portfolio of companies. That is what PINT provides.
Before he became involved in cryptocurrencies, Mr. Tonkin worked on microfinance projects in South and West Africa with the United States Peace Corps. This was in he early to mid-2010s and while he was in Africa he kept in touch with friends in California who introduced him to Bitcoin.
Mr. Tonkin quickly saw how the concept could benefit people in developing economies. The people Mr. Tonkin was working with were miles from the nearest road, never mind modern utilities. After harvest they’d have bags of cash and no good options for it. High inflation made it unwise to hold. They could travel days each way to buy cheap foreign-made goods and bring them back to sell, or they could just spend it all at home. Perhaps they’d buy livestock.
“The problem was not a lack of money, it was one of accessibility,” Mr. Tonkin said.
Most Africans had a mobile phone and everyone under 30 owned a smart phone. More on that later.
Everything clicked in 2014 and Mr. Tonkin moved from a village in West Africa to Zug, Switzerland, one of the capitals of cryptocurrency. Ethereum was soon to go live. Mr. Tonkin set to work creating a blockchain-based mobile money solution for emerging markets and tried to explain to large banks how the nature of money was going to change from the physical to the digital. While some refining still needs to happen, that future is coming soon and when it is fully realized it will make what is happening in the developed world look trivial in comparison.
“I got into crypto for financial inclusion,” Mr. Tonkin said. “I see finance as a very privileged aspect of life. Having cards in your wallet and not having to worry about inflation is something we all take for granted.
“What we’ve been saying for years in crypto, but it has not yet come, is the other two billion people who have no or very little financial resources or financial services that allow them to save, store and transact will have opportunity.”
Mr. Tonkin is a member of the Staker DAO council overseeing PINT’s launch. He said Staker DAO is bringing governance on-chain to a level not present with Bitcoin and Ethereum. It seeks to solve the issue of coordinating decentralized distributed stakeholders so that go in the same direction. It’s governance for people who believe in multichains, not chain maximalists who believe the future will largely be based on one blockchain or another. A handful of chains will likely build the world of permissionless finance.
Admittedly that is not the traditional way in business where many want their company to be the undisputed leader in its field. Especially in this nascent stage for DeFi it’s best to make investments that benefit the whole ecosystem.
It was easy to be a Bitcoin maximalist in 2014 because there was nothing else in the space, Mr. Tonkin said. Then came Ethereum, Litecoin and several forks and while some maximalists remained, the vast majority of people see a few chains each playing a vital role.
Mr. Tonkin is bullish on Polkadot and for good reason. Back in the ICO craze one could launch a coin on Ethereum or they could build a completely new network on-chain. Maybe Ethereum worked for you and maybe it didn’t play to the strengths you saw for your coin. But if you were on it you had to live by their rules.
The other option was akin to starting your own country on a desert island, Mr. Tonkin said. There’s no resources, no other economic activity and no security.
“At the end of the day you have to convince everyone to come from some other island to your island and do things there. And that’s incredibly difficult.”
Even great solutions like smart contracts and different apps gained little traction , but that was before Polkadot, Mr. Tonkin said. Polkadot is a Layer 0 chain, sitting on the bottom of the network and providing common resources for all others plugging into it. A layer of consensus validators secures the base relay network and every other chain leases a slot on top of the network. They each define their parameters based on their needs, plug into the relay chain, send their token and take advantage of every other relay chain connecting to it.
“They specialize in what they’re good at but access other parachains to see what they are good at too,” Mr. Tonkin said.
That utility allows new entrants to focus on their business case by providing much of the engineering for them. Compare it to cloud computing where in the early days everyone needed an engineer to attend to their cloud. Then came AWS and everything changed.
There is strong incentive to maintain your usefulness on Polkadot, Mr. Tonkin said. With a finite number of slots, you have to win an auction to get one, with lease lengths between six and 24 months. When your time is up the community must assess your business case in order for you to continue.
PINT is an index network token specifically focused on top Polkadot projects, Mr. Tonkin said. It provides diversified exposure to products vetted by a team of professionals including Mr. Tonkin. He is joined by Ben Perszyk, head of Portfolio Operations and Polkadot Ecosystem Fund lead at Polychain Capital; Xiao Xiao, investment manager at HashKey Capital; Jack Platts, cofounder and CEO of Hypersphere Ventures; Ruitao Su, cofounder and CEO at Acala & Laminar; and Ben Weiss, Substrate Builders Program, Parity Technologies. One seat is reserved for an active PINT community member.
The expert team will work with the projects to build both their success and PINT’s. The companies provide a percentage of their native tokens to PINT and get some PINT tokens in return.
“This allows them to hedge risk, hold it in their treasury and track performance of the ecosystem,” Mr. Tonkin said.
This takes us back to the opportunity for people in the developing world, those two billion people not served by the current system. Mr. Tonkin sees the combination of new technology and high mobile penetration fostering access to tokens which reflect the price of various commodities. A young person working in Africa with no investment choices that outpace inflation could invest in an index providing new opportunity. That is at most 10 years away, he believes
“They will have more financial freedom to choose how to hold wealth. They are not obligated to certain currency based on their geographic location.Now they will have tools that are simply borderless and permissionless and they will be able to use those tools to add greater financial stability to themselves.”
Bitcoin’s lack of governance is both a blessing and a curse, Mr. Tonkin said. The plus is we have a good idea of block sizes for a long time. The negative is we all need to row the boat in the same direction (in a broad sense) if the industry as a whole is to maximize its potential. It’s time to collaborate. Polkadot can help.
“I have yet to see any other project which has been able to coordinate across Level 1s that is focused on the multichain future and which has been able to execute really well,” Mr. Tonkin concluded.