Defi Is going to Change the World

Much like the internet when it went from an information platform to a commerce platform, defi is moving from a crypto oriented system to a system that ties in real world collateral and items.

Right now, you can use crypto as collateral to borrow money or borrow more crypto. This is convenient. It means I don’t have to sell my crypto if I need cash. I can simply use it as collateral on websites like Cream, Compound, or Aave, and borrow US dollars that I can pay back at my convenience. The interest paid to liquidity providers and charged to borrowers is automatically adjusted based on supply and demand.

The next step is to transition to real world non-currency items. We are beginning to see items like tickets, titles, music rights, art, deeds, and move onto the network as NFTs. Once they are on the blockchain, they can be used for collateralized loans and decentralized transactions.

A couple months ago Tom MacDonald (an independent artist) bought a music beat NFT from Eminem for $100,000 at an anonymous auction and created his own song using the beat. He was able to do this because the NFT included the copyright license. Before blockchain technology, this would have been a much more difficult transaction, and it would have probably involved lawyers, contracts, and meetings. An independent artist like Tom probably wouldn’t have even been given the opportunity to bid on the music.

More complex examples are coming our way as well. For example, the entire buy/sell process (including the loan) for homes can be handled with smart contracts once deeds are attached to NFTs.

In America, this is going to change everything. It will simplify the lending process, and it will open up opportunities for buying, lending, and investing that aren’t currently available to most people.

However, in countries that don’t have the infrastructure we have (county registrars, banks willing to do business with individuals, escrow), the effects are going to be society changing. It can help lift entire countries out of poverty.

The changes coming because of blockchain technology are going to be massive, and most people are dramatically underestimating the potential of this new technology.