Weekly Wisdom #9

Amidst the chaos of a volatile financial market, welcome to Weekly Wisdom—a sanctuary for the wise and discerning. While others fear the unwinding fiscal thread and collapsing monetary systems, you seek opportunity. You research, analyze and beckon forward newfound knowledge with welcome arms. Together, we journey upwards, learning from experienced minds and embracing the well of wisdom.

Let’s voyage on.

ChainLink CCIP

Historically the Chainlink network has secured trillions in transactional value within the DeFi ecosystem. And while most known for transacting $8.2 trillion via Price Feeds, Chainlink also provides secure randomness, decentralized automation, and Proof of Reserves.

However, there is one piece of the puzzle that ChainLink is yet to solve. Blockchains currently lack one pivotal part of all technical infrastructure — Interoperability.

We are moving towards a multichain realm. The development of new chains is non-stop. Centralized entities are shifting to a decentralized world, a by-product of this, is the proliferation of application-specific super chains such as Coinbase and the Base chain. And while exciting, this exponential increase in new networks nourishes fragmented and siloed liquidity. Without secure cross-chain infrastructure, chains cannot interact seamlessly. Liquidity is native, not global.

The solution so far has been centralized bridges, in which you must trust that the counterparty is backed by the tangible value it is issuing on the connecting chain. However, time and time (and time) again, we have seen this trust destroyed. Centralized bridges are inherently one of the largest risk choke points in DeFi.

ChainLinks Cross-Chain Interoperability Protocol aims to solve liquidity fragmentation with a secure and robust cross-chain system. What makes it so secure, is something called Active Risk Management (ARM). CCIP isn't a single network, it’s multiple decentralized oracle networks working in combination to securely transfer data and tokens cross-chain.

ChainLink is making strides to become the dominant infrastructure for transacting value across blockchains. But it’s not only DeFi.

Swift and 12+ major financial institutions and financial market infrastructure providers are collaborating with Chainlink around CCIP to integrate tokenized assets between public/private blockchains. This alone has the potential to bring trillions of dollars into DeFi.

Personally, I believe this makes ChainLink as a company and LINK as an investment an extremely intriguing venture (not financial advice). CCIP as a technology requires fee payments in LINK or alternative assets (native gas coins). However, an automated on-chain conversion system is created in which payments in alternative assets would be converted to LINK at a premium of 10%.

Currently, these payments flow to ChainLink Labs and is unknown exactly how this revenue is distributed. However, as Chainlink Staking expands to support more Oracle services, including CCIP, a portion of the user fees paid for those services will be directed to stakers in exchange for increasing Chainlink's crypto-economic security. CCIP is only in testnet at the moment but has already seen a rapid rise in cumulative revenue for ChainLink as detailed in this great Dune Dashboard by Eric Wallach.

Recession Cancelled: Crypto Summer Is Here

Larry Fink said Bitcoin was a good place to protect your assets from the devaluation of a currency.

Who's Larry Fink?

Oh, only the CEO of Blackrock - The largest money-management firm in the world with more than $10 trillion in assets under management.

Do not overlook this statement.

“It’s going to transcend any one currency… We believe there are great opportunities”

This is a profound paradigm shift in how traditional finance is talking about Crypto as an investment. Mark Yusko believes that the BlackRock ETF application will be the first Bitcoin Spot ETF to be approved and will bring a wave of new capital and attention into crypto. Mark says that everything over the past two years was intentional. It was meant to disrupt the disruptors and allow the trillion-dollar capitalists to get in first.

Mark then goes on to talk about the current monetary system. He says that if empires become overly indebted (which the US is), they have 4 choices.

1. Pay Back Debt

2. Restructure the debt

3. Default

4. Devalue

He states that the first 3 won’t ever happen. The US physically can’t pay back the debt, no one is going to take the other side of a restructuring, and you can't default without losing your job. Devaluing the currency is the only way.

So, what happens next?

Money is cyclical - Ray Dalio

I have recently been reading Ray Dalio’s book, “Principles for Dealing with the Changing World Order”.

Raymond Thomas Dalio is an American billionaire investor and hedge fund manager, who has served as co-chief investment officer of the world's largest hedge fund, Bridgewater Associates. In this book, he explains how his extensive research into empires over hundreds of thousands of years, has led to a very important conclusion.

Just like the weather, monetary systems are cyclical. Booms and busts are core pillars of the financial, political, and geographical realms. Great empires rise, and once-great empires fall. In the continuous ebb and flow of history, change and fluctuations are an inevitability. The reason we don’t quite see these large paradigm shifts is due to the time frame in which these cycles operate. The rise and fall of monetary empires is much longer than a human lifetime.

Ray Dalio emphasizes that people are often surprised by the magnitude and timing of economic cycles due to inherent human biases, the complexity of the global economic system, incomplete information, the unpredictability of black swan events, and the tendency to extrapolate recent trends into the future.

So, why are we exploring this? While the dollar is the world's current reserve currency, this constantly fluctuates as the world evolves. China, Spain, the Netherlands, and the United Kingdom were all the epicenters of trade and growth once upon a time.

The US is currently in 32 trillion of Debt. Since 1913, the U.S. dollar has lost 98 percent of its domestic purchasing power. The Fiat-based monetary system is dictated by money printing, and it’s this unchecked money printing that results in unprecedented power and control.

It’s a continuous flywheel with no way out. With no tangible backing, no energy requirement, and continued loss of value and purchasing power, these Fiat-based monetary systems only result in one direction: The death of a currency, and the end of a cycle. It’s a powerful statement. So, what about the US dollar? Is this ship slowly sinking, and more importantly, is there a tangible solution?

The bridge between all chains, a changing of the crypto - TradFi tides, and the cycling rise and fall of monetary empires, It’s been quite the discovery! Until next week, keep wise.