A World Where Decentralized Finance (DeFi) Takes Over Everything

2 mo (edited)
LeoFinance
5 Min Read
1060 words

One of the unique things that happen with technology is how our conception of things change. It is inevitable that new capabilities offer a novel way of looking at the world around us. Many take a philosophical approach, trying to understand the dynamics as they are unfolding. Most, simply hold onto their old ideas until they have to change.

With cryptocurrency, we are seeing all being disrupted. Our entire relationship to money, and by extension, everything, is changing. We often frame the discussion in terms of the traditional financial system versus one we are creating. The reason for this is that is what people understand.

In this article it is time to expand the view further into the future to see what is probably going to evolve.

For the moment, finance is its own industry. While it touches everything, it is a separate entity from many other parts of life. That will no longer be the case.

One concept that is helpful to embrace is that Decentralized Finance (DeFi) is not going to operate on its own. Instead, DeFi is going to be interwoven in everything. All aspects of life will have DeFi built into it.

Allow that notion to set in for a moment.

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Investors No More

What does the world look like without investors? These are going the way of the Dodo bird. You are going to have to bear with me on this one.

Since our relationship to money is changing, that means all aspects to it are under consideration. The concept of the "investor" will face over ensuring decades.

Let us look at a very simple example.

To sell 100 million HIVE only requires 1 million people willing to buy 100 HIVE each. If this were to happen, we would have 100 million investors. Or would we? Under traditional models, if this were a stock, all would be investors. However, under this scenario, things are different.

What if these people purchased 100 HIVE simply for access. While it is true they enjoy any appreciation in the value of the coin, their motive is to participate. In this instance, Hive is utilized for access, not profit in spite of that fact that component still exists.

We see another example unfolding with Polycub. This project is adding governance abilities to its xPOLYCUB token. People who are holding this are able to vote on different issues affecting the platform. One of the first will be the directing of rewards. Through stake-weighted voting, each holder will determine which pools/kingdoms get the APR.

Thus, we could see people buying stake in the future for the governance.

There are an assortment of new terms tossed around. Many of them reveal how some of these concepts are changing. When people "invested" in ConstitutionDAO, were they really investors? Sure they put up money but it was closer to a donation. They were not seeking a return as much as participating in something they felt was important.

As we can see, there are already a number of reasons to acquire coins and tokens outside the traditional investment model.

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Tokenization of Everything = DeFi Of Everything

We cannot separate tokenization from DeFi. Because of the infrastructure being built, the ability to offer a multitude of services around all of this will be possible.

Thus, we are confronted with a new reality: the tokenization of everything equates to incorporating DeFi into everything.

It all stems from a basic premise. What do people do with all their tokens? Consider how things will look when infrastructure, fandom, hobbies, education, and most activities are tokenized. Throughout each day, people are getting rewarded in hundreds of different tokens.

What does that world look like?

To start, it is the Age of Abundance. Here is where we see the scarcity economic model completely upended. This is something that most cannot envision.

Another transition is where financial concepts such as collateralization, swapping, remittance, and hedging all come into play. Suddenly everything as a monetized component to it.

Someone can get rewarded for eating in a nutritious manner, take the tokens earned and drop them in a liquidity pool, which than is collateralized to get a loan used to buy Space Colonization 14 tokens and start at a higher level in the game. This, of course, ends up generating more rewards from that, which can be used to pay back the loan.

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Network Effect Is The Funding

We live in a world where fundraising is a part of life. This is done by non-profit organizations looking for donations. Business start ups are always looking for seed capital. Existing firms often tap equity or capital markets for expansion.

Whatever the cause, funding is required. The Internet even introduced a concept called crowd-funding which allowed average people to get into projects with small sums. This was a step forward but still a variation on the same model.

That is going to end. What happens when there is no need for funding? How would this work?

With the ability to tokenize, any project can turn itself into a monetized entity. Therefore, it instantly is playing in the DeFi arena. Of course, this harkens us back to the basic question: what gives a token value?

Here we see the primary driver is always the network effect. As more people involve themselves with the network, value increases. Over time, more use cases are developed creating a positive feedback loop.

Now we just combine these together and we can see how a project (cause) can simply spin up a token and let the community give it value. Throughout the different activities, the token is distributed to the members, who are able to utilize it in different ways. If it is a very popular cause, the value of the token can skyrocket.

Hence, funding achieved.

These are just a few ways the world is going to change over the next couple of decades. As more is tokenized, it becomes inevitable that DeFi enters into it. This will cause another expansion through the power of compounding.

All of this will lead to a point, by the middle of the century, where the concept of money is completely different.


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0

If everyone made coins, tokens and crypto in their own name. Then the crypto world will be destroyed. The more cryptocurrencies that appear, not the better, the worse in fact.

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1

Useless shitcoins don't have any effect on the crypto world. They just drown and may take a few uneducated unlucky investors with them. Utility tokens like store credits may divide the market and suck some value from the bitcoin maxis but should also expand the total market of the crypto world.

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That's of course my brother. But if we associate it with physical money. Shouldn't there be a restriction to print it? Likewise with crypto, if there are no limits, it will damage the market.

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If the token can buy a thing and that thing has a fixed monetary value and a demand, then the token probably is worth about the same as the thing unless the market is too small for the token supply.

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Like HIVE has a very extraordinary storage area. Other crypto are for trading only. I think crypto like HIVE, ETH are able to survive in the future.

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1

HIVE is a competitive option for all kinds of L2 dapps because of its fast block time, predictable resource credit model and good and trustworthy community. ETH will stay the central hub and launchpad for decentralized finance and other projects.

0

Right Brother. Thanks for the enlightenment about Crypto.

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Why do you equate it to physical money? We are not in the physical world with cryptocurrency. This is Internet money i.e. born and residing in the digital world.

What are the limitations in this realm? Computational power and processing speed? That is about it.

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The more cryptocurrencies that appear, not the better, the worse in fact.

How do you figure that?

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There will be inflation, because crypto is not a consumable product. If there are no restrictions, . It is seen from a social point of view, not from a mathematical point of view.

Maybe you can give another view. I need knowledge about it.

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This operates in the digital world. How do you get inflation when there are digital products and assets showing up daily.

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It may be related to my being a former banker; I think the DEFI category has the strongest value proposition. It is an area that has the potential to create synergies by combining with many other categories such as web3, play-to-earn, and NFTs. I think finance is the homeland of crypto.

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1

I think the DEFI category has the strongest value proposition.

I would agree except I dont see it as its own category. DeFi is going to penetrate everything. It will be ubiquitous. People will open up a game, there is DeFi. They will enter a "world" in the Metaverse - there is DeFi.

Essentially I dont see how it can be separated out from all that is taking place. Once something is tokenized, it has involved with DeFi to some degree.

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2 mo

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Definitely the decentralization of the money give us more power to take our decisions in a properly way. Is the beginning of the evolution individual to create a best society.

1

Is the beginning of the evolution individual to create a best society.

Like most technologies, it is neither going to be utopian nor dystopian.

We will simply see progress. I do agree we will see more power in the hands of individuals. Of course, that could be a negative considering how many behave and the lack of understanding they truly have. They are like children when the parents go away for the weekend.

A lack of financial education could mean this power in the hands of individuals is actually a detriment to them.

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2 mo

Very interesting. I know I am probably going to be one of the people that has a hard time letting go of some of those old ideals and habits when it comes to finances. I kind of like the fact that I have one foot in both camps. It gives me a really great overall perspective.

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1

Unfortunately those who hold onto the past get left behind.

One foot in each is really a foot in none. We saw this lesson repeated throughout history. Unfortunately, the pace of technology is only accelerating meaning it is far worse.

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1
2 mo

I think I will be okay. Maybe I am less in-between than I think.

0

Ask your wife, she will tell you what you are.

On second thought, maybe you are better off not knowing.

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1

I feel the pairing the stablecoin up with the external blockchain coin can be a good option for the bringing in the investors to the chain. I am sure that the centralized markets did the same by creating ETF for the bitcoin and ETH. I wonder what would DAO do for the blockchain governance and the new investment. I feel DAO can be a good thing that can bring the "future option" type of the markets to crypto.

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All of that has enormous potential. We are still in the early stages of much development. DAOs, for example, have not received much in the way of innovation. Give people 5 years playing with it and see where we stand.

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1

hmmm... but lot of risks in DEFI...especially that collaterisation, taking loan and using it elsewhere earning more interest and paying back...its complicated and risky.

Yes, mature folks who do their research can do, so can street smarts but the folks who enter for hype lose out right...

Hell...they lose out without DEFI in exchanges with leverage trading.

Somewhere new way of balancing things people have to figure out...it will be fun...crypto is very engaging, even DEFI...endless oppurtunities.

Oh yes, tokenisation is invitable, why the CBDs are tokenisations of fiat right?...

It makes things convinient, for records, storage, tracking and there is blockchain apabilities...

But too much virtualisation is not healthy I feel... in this world still there are lots of poor who don't have housing, forget internet and computer.

I want to know how Blockchain will change lives for them.

Already I read some projects where poor people who don't have bank accounts can borrow money with credit scores scored on Blokchain, each time they borrow and pay back, a credit score is given, so if they have proper credit score they get loan, negative they won't.

It's important that Blockchain helps the disadvantaged, I think its not doing much there right now...

Ofcourse, Hive I read help Venezulians earn, play 2 earn...its better than nothing.

Still... for DEFI to grow grand it should be more secure and I have a feeling the Government will try to control DEFI space... already metamask can recognize the city your in and its discriminating!! - people from certain countries identified by IP and then they don't get acess, they use VPN...

So, does decentralisation, where entity is free from Govt. control really possible.

Also what about education...its easy for you and a little also for me to understand DEFI, because we are in the space for a while...not the uneducated...

lets see...

Right now DEFI is exciting, but the time period you envisage, it will get boring becoming a norm, we live in exciting times in crypto but hard times are there to bash things up...

its started!! - there might be a time not very far where we feel currency, fiat currency will collapse and we have to manage with crypto and DEFI... for a start.

1

All that you state can be answered by just wait. Remember, we are still in the early stages of this. It really only started to accelerate the last few years. Before that, we were dealing with the circus of ICOs and nothing but speculation. Each year the industry evolves with more options being presented.

As long as someone is on the Internet, they are in the game. Right now, we have over 5 billion people online globally. That number keeps increasing. Even in the US, there are homeless people yet they all seem to have a phone with Internet access.

So we are seeing a massive shift without realizing the impact.

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We have to figure out how to drop the DEFI name and start calling it something else as none of it is really decentralized…

I like Finance 3.0, goes with Web 3.0…

Gold standard was finance 1.0
The Fiat experiment is Finance 2.0
Crypto is Finance 3.0

I don’t know, it’s morning on 4/20 so I’ll let you guess where this is coming from, lol.

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We have to figure out how to drop the DEFI name and start calling it something else as none of it is really decentralized…

The name DeFi is fine, it is the lack of decentralization that is the problem. We have to work on that part. If not, we might not have any DeFi or anything else since it will be zapped.

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1

That’s why I am loving this 20% HBD stuff, lol. Safety in decentralization.

1

Without a doubt. It is one of the leaders in that realm. We just have to keep pushing things forward in that regard.

HBD can be a superstar for Hive. I am not sure people fully realize it yet.

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People have that number go up mentality and don’t think stablecoins are sexy.

1

They will get a lot sexier in a bear market.

When numbers go down, people get depressed. Stablecoin hodlers can laugh all the way to the bank.

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1

Or at least laughing, well crying at the same time, when I use them for bills, lol

1

Yes well cant do your work without the Internet.

Smoke signals do not seem to cut it.

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2 mo

It looks to me a very good system, if ever it happens,but thinking from the tech based perspective, financial sector would be seen to increase the percentage of defi, yet the provisional models do seem paradoxically parabolic.
But, looking at the projected growths of the business nodels turning and pivoted by the defi mechanism, it is sure to have the sector to be fully universalized.
Idea seems so amazing!!

1

Complex systems have a way of gobbling up all that is out there. That is exactly what I see forming here. There is no centralized plan or direction taking place. Just a lot of mishmash of projects, going every which way.

However, that is the power. While we can point to the major TVL and what is taking place on Ethereum, what gets overlooked is something like HBD. Here is where we see true DeFi in action. Of course, to grow that, means incorporating it into payment systems and applications. As that grows, it flies under the radar but is a powerful alternative.

Plus it is out of the reach of governments, central banks, and corporations. So what is the result going to be if it is successful.

And this is just one example.

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0

Consider how things will look when infrastructure, fandom, hobbies, education, and most activities are tokenized.

Something I've been considering since 2018 when I found about actifit.

Curious to see how DeFi will interefere with payment systems.

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1

Actifit is an example of an application that is an economy, tokenized meaning monetization. At the same time, it branched out into different areas of DeFi.

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With Defi one can do most of the things that banks support such as earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more but it’s faster and doesn’t require paperwork or a third party.

As with crypto generally, DeFi is global, peer-to-peer (meaning directly between two people, not routed through a centralized system), pseudonymous, and open to all.

1

All true.

We dont have a lot of this built out yet but it is taking place. Give it another 5 years and I would think we can rival much of what is in place now.

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You can say this again sir because I best believe this .

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Crowdfunding has been amazing but the current structure of things has made that quite hard. Just look at the Canadian truckers and what happened with the banks. I guess this would not happen if they transferred money via decentralized blockchains like BTC or Hive. However, the need for crypto to be accept needs to increase so we can throw out the banks.

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1

Yeah but ConstitutionDAO showed how easy it is using crypto. The problem is we still have centralized access points. This is going to be something that the industry has to work upon.

I will say this, if the Canadian Truckers were paid in HBD, the government couldnt have stopped them (nor GoFundMe).

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We can never undermine the power of networks. Every true network of people is an asset to everyone involved and that's what DeFi represents. Finance is taking a whole new shape and happening around the cryptoverse is bringing many out of poverty. The only hindrance is how fast and wide the knowledge can spread.

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Buen día amigo @taskmaster4450 me encanta lo que usted escribe, a mi particularmente me gusta la palabra "DEFI" , obviamente respetando las diversas opiniones, por que ? pues no depende de ningún ente que regule dicha finanzas, por colocar un mal ejemplo, fíjese Rusia miles de millones bloqueados por una mala decisión, si trabajáramos mas con Criptografia y menos dinero Fiat, seria mejor .

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