Investors should focus on Figure as it expands from the HELOC market into the first-lien mortgage space, a move that increases its total addressable market by 25x. You can monitor the company’s performance in real-time via the Provenance blockchain, where 90% of its loan production is visible to the public. For exposure to the underlying infrastructure, the HASH token serves as the staking and governance asset for the Provenance network, which is seeing rapid growth in Real World Assets (RWA). Consider the Hastra protocol as a high-conviction play within this ecosystem, as it has quickly reached $600 million in volume. Finally, look toward tokenized equities and the Open ecosystem to capture high yields from stock lending fees that are traditionally kept by brokers.

This financial analysis explores investment insights from the Empire by Blockworks podcast featuring Mike Cagney, co-founder of SoFi and Executive Chairman of Figure. The discussion focuses on the massive disruption of traditional capital markets through blockchain technology and the growth of Figure as a market leader in on-chain lending.

Figure (Private/Public Hybrid)

• Figure is a financial technology company that leverages blockchain to originate, finance, and sell loans (primarily HELOCs). • Financial Performance: The company reported $2.9 billion in marketplace volume for Q1, with adjusted EBITDA margins around 50%. • The Moat: Cagney emphasizes that Figure’s competitive advantage is not its origination software, but Figure Connect, a liquid capital market for private credit that functions like a private version of Fannie Mae/Freddie Mac. • Efficiency: By using blockchain as a "truth" layer, Figure eliminates the need for manual audits, reduces fraud (double-pledging), and allows for real-time settlement, which significantly lowers the cost of capital.

Takeaways

• Watch Contribution Margin: Investors should evaluate Figure based on contribution margin rather than "take rate." Lower percentage fees on larger loan amounts (e.g., first-lien mortgages) can result in higher absolute profit and better margins. • TAM Expansion: Figure is moving from the second-lien HELOC market into the first-lien mortgage space, which is roughly 25x larger, representing a massive increase in Total Addressable Market (TAM). • Transparency as a Catalyst: Because Figure’s loan production is visible on the Provenance blockchain, analysts can model roughly 90% of the business in real-time, reducing the "surprise" factor of quarterly earnings.

Provenance Blockchain (HASH)

• Provenance is a public, decentralized, proof-of-stake blockchain designed specifically for the financial services industry. • Privacy Features: It utilizes an encrypted object store to keep sensitive borrower data (SSNs, addresses) off the public ledger while still recording the "hash" of the asset for truth and validation. • Token Utility: The HASH token is used for staking and governing the network.

Takeaways

• Potential Token/Equity Convergence: Cagney expressed a desire to eventually align the interests of HASH token holders and Figure equity holders, potentially allowing equity to serve as a staking asset. • Institutional Adoption: The network is seeing growth in Real World Assets (RWA), with the Hastra protocol reaching $600 million in volume, making it one of the fastest-growing RWA tokens.

Tokenized Equities & "Open"

• Open is Figure’s ecosystem for native on-chain equity issuance, featuring an Alternative Trading System (ATS) that allows for 24/7 trading, self-clearing, and self-settlement. • Stock Lending Revolution: In traditional markets, brokers keep the majority of the interest earned from lending out your shares to short-sellers. On-chain equity allows the shareholder to capture that yield directly.

Takeaways

• Countervailing Short Pressure: Native on-chain equity can make shorting more expensive and reward long-term holders. If a stock has high short interest, the "borrow fee" (which can be 30%+) flows directly to the holders, creating a high-yield incentive to stay long. • Liquidity Solutions: Figure solves the "cold start" problem of new exchanges by allowing a 1-for-1 swap between on-chain shares and NASDAQ-listed shares, ensuring price parity and deep liquidity from day one.

Investment Themes & Sector Insights

Decentralized Finance (DeFi) vs. TradFi

• The "Rent-Seeking" Middleman: Cagney argues that blockchain will eventually disintermediate entities like DTCC, Visa, and major clearing banks by reducing the "seven parties" currently sitting between a buyer and a seller to just two. • Pareto Efficiency: The shift to DeFi lending is a "win-win" where borrowers pay less and lenders earn more because the bank’s "rent-seeking" margin is removed.

The Future of Banking

• Stablecoins as Deposits: As stablecoins begin to offer yields backed by Treasuries (e.g., YLDS), they become a superior alternative to traditional bank deposits. • Agentic Lending: The next evolution of the "Super App" is a self-custody wallet equipped with AI agents. These agents will automatically harvest tax losses, find the best yields across protocols, and manage credit/collateral without the user needing to understand the underlying technicals.

Risk Factors

• Regulatory Environment: The success of these technologies is heavily dependent on "benevolent regulators" or legislative clarity (e.g., the Clarity Act). A shift back to a hostile regulatory environment remains a primary risk. • The "Tiny Pie" Problem: Despite the tech's potential, Cagney notes that $12 billion in a DeFi protocol is "immaterial" compared to the $133 trillion global equity market. The industry must move trillions, not billions, to achieve true relevance.