Why I’m excited about DeFi – and yes, Crypto – It’s a better Finance

Finance is being reimagined by DeFi & crypto technologies. This presents opportunities to generate 10X improvements and release trapped value in the Real World.

Finance is being remade

Finance is being reimagined by Blockchain/DeFi/Web3 and crypto technologies. However, the biggest change doesn’t come from new technology, but from a new way of thinking about Finance: a financial system built without intermediaries (who in many countries operate under outdated legislation that heavily favors incumbents, and/or provide the wrong incentives), a new way of establishing trust (via a distributed consensus), and how to execute agreements (automatically via smart contracts without depending on a country’s legal system). This presents new opportunities to generate 10X improvements and release trapped value in the Real World.

How it’s better

The New Finance is open (anyone can build new applications), global (anyone in the world can have access), transparent (all transactions are recorded publicly), accessible to many more people (it literally costs nothing), and it is also much more flexible, allowing for a more open innovation model by easily combining protocols (through composability). 

What’s the Vision

The Vision is open & global finance and capital markets, especially to make them available to the large proportion of people and businesses in the world that currently don’t have access to or are underserved by them. In other words, democratize (vs. privileged) access to capital.

[As an aside, this is not a call for no regulation, but to define rules taking advantage of the possibilities offered by new technologies instead of instead of retrofitting new technologies to old concepts.]

How it will be adopted

Many aspects of Decentralized Finance are still a work in progress, but it is already better than the options available to many people in countries where financial systems are underdeveloped or focused on a richer segment of the population; the key point is that it is already solving problems in the Real World (see examples below). It is completely possible that DeFi will leapfrog Traditional Finance in many countries, just like mobile phones in Africa and digital payments in China leapfrogged landlines and credit card payments, respectively. 

In rich countries, where Finance is more developed and use cases are more complex, there are still many issues to figure out, but if history teaches us anything is that the technology will keep improving and it’s possible to see how DeFi will not only replace cumbersome processes (like settlement of securitiesmore open private markets, and so on), but also expand access to the large portion of people and businesses who are still underserved even in developed economies (think of small businesses and people with lower incomes).


Here are some examples of Real World Problems that DeFi and crypto are solving today, where existing solutions are either too expensive or not available to most users who need them:

• Bitso: cheaper, faster remittances.

• USDC: saving in (digital) dollars from any country.

• CitaDAO: expanding access to real estate for everyone.

• Agrotoken: using tokenized grain as collateral to finance purchase of supplies.

• Addem Capital: tapping global sources of funding for businesses.

• Goldfinch: financing of unsecured loans on emerging markets.

• Centrifuge: much cheaper borrowing using Real World Assets as collateral. 

What’s Next

So What’s Next? Get started and use it to solve more existing real world problems, then keep improving and adding more and more use cases until the vision of Finance for everyone becomes a reality.

#defi #blockchain #crypto #web3 #finance

What comes after the crypto winter? Real World innovation

We are in a crypto winter, but builders keep building new applications using crypto-related technologies. The next wave has already started, and it is focused on bringing crypto innovations to the Real World.

What: Crypto winter before the next wave

We are in a crypto winter, and it is understandable since so far, crypto has mostly been used for speculation, not solving problems in the Real World. However, the key crypto-related technologies (blockchain, smart contracts, decentralized applications, tokenization) have the potential to remake industries (starting with Finance) and release enormous amounts of trapped value. 

If we look beyond the headlines, we can see that many applications that are already solving real problems in the Real World. If we look at the long-term trend (beyond the current volatility), we can see these technologies are categorically better and create fundamental changes for how to solve many existing processes (see examples below). In fact, this stage reminds me a lot of the conversations around Amazon (remember Amazon.bomb?) and the technology sector in 2000 after the Dotcom bubble burst (and follows the Gartner Hype Cycle almost perfectly, just as we navigate through the Trough of Disillusionment). 

Who: 2 Cryptos: Traders vs. Builders

A key insight is that there are two cryptos: financial crypto (Wall Street people, focused on trading and short-term profits) and tech crypto (Silicon Valley/engineering/entrepreneurial people, focused on building products that solve real world problems); where most people see things that don’t work, the tech crypto community see a list of things to be fixed

They key to make this work is to look for pools of trapped value where we can apply breakthrough technologies to reimagine existing processes. We start with simpler specific (and broken) use cases, and then keep on improving and adding more complex and valuable processes. 

How: Real World applications are already here, if you know where to look

We can already see many examples of applications working in the Real World – they are just not as publicized as trading and exchanges. As of today, Crypto and related technologies are already solving problems for lots of users: sending remittancesholding savings in a stable currency in unstable economiesmaking Real Estate accessibleglobal financing for Emerging Marketsfinancing agricultureaccessing global sources of capitalborrowing against Real World Assets, among others. 

What these applications have in common is that they are mostly in underserved markets where solutions with current technologies are not cost-effective or too cumbersome. And as technology keeps getting improving, we can move on to more complex problems, like settling securities trading instantaneouslytokenizing Real World Assets and adding liquidity to private markets, and so on. 

Also, we can look at other metrics that show adoption of these new technologies:
• Decentralized Finance has held up even after the implosion of many centralized exchanges
• Stablecoin usage keeps growing and now the transaction volume is higher than Mastercard and American Express
• Developers keep building new applications
• Energy requirements have gone down dramatically for the Ethereum blockchain
• And more 

What’s Next 

Crypto and crypto-related technologies are here to stay; if we look beyond the hype we can see it already working in specific industries. The key is: Focus not on going from 0 to $30B from one day to the next, but on building the products that people need.

#blockchain #crypto #defi #web3 #finance