Crypto, an Oral Essay

DeFi stands for decentralized finance, but it's really more like open finance. Until now, the history of finance has been centralized or closed. You go up to a bank or some other kind of financial service provider and you engage in a relationship with them where they promise they'll do certain things... But, ultimately, you're putting your money into a black box and you're hoping—and trusting—that they're going to do it exactly like they said. Decentralized finance (DeFi) is an effort to deconstruct that and make all those pieces open and transparent.

And so this is a concept that, in the crypto space, is called composability. What it essentially means is that developers can build more with less resources because they get to stand on the shoulders of all the other developers who've built stuff before them. And so, if we're right about that, there's good reason to believe that crypto can be one of the fastest growing waves of software innovation ever because of this idea of composability and the fact that developers can build more with less.

NFT stands for non-fungible token, which is just a term used to describe a unique digital asset whose ownership is tracked on a blockchain. This can be a really broad set of assets from digital goods, like virtual land and artwork, to a claim on physical assets, like real estate or clothing items.

The way I think of what a blockchain is: It's a virtual computer that sits on top of a network of physical computers—sometimes called miners or validators—that can make strong game theoretic guarantees that the code it runs will continue to operate as designed. In other words, it's a computer that can make commitments. It can make commitments to users, it can make commitments to developers, it can make commitments to anyone that's accessing it.

Tokens are an innovation that are kind of akin to data packets in that they're a standard way of moving bits of value just like we moved bits of information—and that is very granularly, instantly to anyone anywhere in the world. And so what that means is it's now possible to distribute value to users of Internet platforms at scale.