He drew a distinction between asset-backed stablecoins such as USDC and Tether—the latter of which has remained famously opaque regarding its reserves—and algorithmic stablecoins such as UST.
Algorithmic stablecoins, he said, have “been tried so many times over the last 10 years; even in 2014, people were trying to theorize different ideas.” He added that, “Tether launched for a reason, but they realized you can’t create a stablecoin backed by the same type of speculative asset, so when one starts going down, people are going to be selling one for the other.”
Crypto film financing
Shrem’s latest project, Defiine, is itself based around stablecoins. Billed as a digital finance solution for independent films, it leverages “assets and IP against crypto liquidity pools.”
“We’ve figured out a way to create potentially a stablecoin that’s backed by a basket of NFTs,” Shrem said. “The NFT is a lien against a tax credit or in-film minimum guarantee, or negative pickup, or Netflix saying, ‘We’ll give you $3 million when you finish the movie, and over three years.’ Currently, there are banks that do this, but they charge 15% and higher.” It’s a “huge problem” for filmmakers.
“There’s a new phase of stablecoins coming—stablecoins 2.0,” said Defiine co-founder Tom Malloy, president of Glass House Distribution. “You saw what happened to UST; bottom line is, stablecoins backed by assets, I feel are still viable.”
Shrem argued that over the past few years, all decentralized finance (DeFi) has been based around yields. “You go on Vesper or Curve, you can do vaults and you can get automated market making, but all the yields that people are getting, 5% to 60%—what are the businesses behind them?” Securitizing physical assets like houses introduces the prospect of securities regulations, along with costs like maintenance, he said. “What other asset is digital, has value, and is the largest export of the United States? The film business.”
Malloy suggested that the platform could offer an alternative route to tax credit financing for films. For a tax credit of 25%, a million-dollar film could recoup $250,000. “There are places you’ve got to be done with the movie, then wait another nine months afterwards. There are places that loan that money, but it’s just a loan with a high interest rate; maybe they’ll give you 85% of that money. We have much better interest rates, and the difference is that people are going to have a stablecoin, so that anybody can be part of the liquidity pool.”
Shrem argued that the platform resolves “significant liquidity problems” for filmmakers. “It’s not like, ‘Give me $100,000 and I’ll go make a movie.’ It’s, ‘I have a script, I have actors attached. I have a director, I have a state that will give me $300,000 on delivery.’ Why not be able to put that on a protocol? You’re creating a digital asset anyways.”
Shrem and Bitcoin
The Defiine platform is being built using Mintlayer, a Bitcoin sidechain for tokenization and smart contracts.
Shrem has a long and storied history with Bitcoin, and is regarded by Bitcoin maximalists as one of the community’s pioneers—and martyrs. In 2014, aged 24, he was sentenced to two years in prison for aiding and abetting the operation of an unlicensed money transmitting business related to the Silk Road darknet marketplace.
Since then, he’s reinvented himself as a crypto evangelist through speaking engagements and his podcast Untold Stories. With stablecoins facing renewed scrutiny from financial institutions and lawmakers in the wake of Terra’s implosion, selling people on the idea of a stablecoin backed by film IP could prove to be a test of his skills.
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