A World Where Decentralized Finance (DeFi) Takes Over Everything

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4 min read

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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