Although it certainly represents the best alternative due to its overarching benefit to society.
DeFi represents a new paradigm that opens traditional finance by migrating issuance, management, intermediation, custody, and investment of crypto-related assets toward decentralized actors via smart contracts.
Crypto is global and the myriad of variety as far as products and services is growing regardless of geographic boundaries.
A new breed of crypto entrepreneurs is coming to the market with a more refined set of services that aims to increment consumer adoption while the market matures as a real financial alternative.
In the quest to bring a quality topic to our DeFi of Everything for Everyone, Virtual Summit, we’ve invited Brenton Naicker, co-founder of Block Alpha.
We want summit attendees to have access first hand from smart young entrepreneurs set to change the world’s finance as we know it. This what we chatted about:
(DOE) Bitcoin maximalists are increasingly speaking about crypto being at the forefront of the 4th industrial revolution -and especially Bitcoin. However, some figures are showing a different reality as they’re showing that roughly 80% of BTC in circulation is under the ownership of 2% of the miners. Primarily Chinese miners.
Based on data piled up by different sources, 67% of the entire BTC supply minted and in circulation hasn’t been used so far. They’re still under custody and no one is currently using it. So, it may be possible that 67% of the BTC minted is frozen in cold wallets saving it for later?
So, being that way, how an industrial revolution can be fueled by crypto assets that are not circulating and are controlled by only a handful of actors?
(BN) Personally, I feel the main reason these pools are holding onto these Cryptoassets as opposed to liquidating into fiat is the long-term belief in value accrual. In addition to this many of the pooled wallets today only represent on chain ownership and not actual ownership [, which still doesn’t bode well for the centralization argument. More onto that point. . .
Popularly or not, I believe Bitcoin may infact not be the future. For now, it most certainly represents the best alternative but its overarching benefit to society was the introduction of a new trustless and transparent value storage and transfer system. An alternative to the central banking status quo if you will, and one that seamlessly fits into our increasingly digital world.
With that in mind I do believe at present Bitcoin has the best chance of realizing that future, and the centralization issue will be overcome when the general public actively aims to acquire the asset. At this point the demand should fuel the price to a level where these centralized parties are happy to at least partially liquidate their holdings. If you extrapolate the distribution over a long enough time period it will achieve sufficient decentralization provided the underlying utility and demand is sufficient.
(DOE) As smart contracts are growing in popularity, what will be the future for law enforcement agencies, collegiate attorneys and even courts of justice around the world if payment-related activities can be solved through the implementation of smart contracts?
(BN) As with any new technology diving in with both feet is often not recommended. To really conceptualize all the issues and problems we could potentially face will for the most part require us actually operating the technology in a live environment and facing those problems. As such, in the begging phases I believe it will be quite a collaborative process with much input and oversight actually coming from the parties mentioned.
Again, following suit with similar innovation, such as Robotic process automation in A.I, the tasks that these technologies generally take on are more labor and time intensive and would free up that portion of the workforce to upskill and repurpose their labor to more specialized and nuanced tasks, in addition to the obvious human capital that will be required for continuous development, oversight and operation of such technologies.
(DOE) As DeFi is gaining traction, many critics are complaining that this model is not making money but that’s nothing but a marketing name to cover those loans done under a non-custodial agreement or without direct custody of the assets. My question to you will be, is it real decentralized finance or it is a way to manage transactions in a format where the assets remain in the hand of the loan recipient?
(BN) To me, these are just growing pains of a new and highly prudent industry, that of finance and credit. As we progress and the legitimization, regulation, and institutional infrastructure comes into place the operation of such platforms will become more fluid, compliant and their business and revenue models more defined and formalized. Let me elaborate slightly. . . .
With the programmable feature of cryptoassets, we can now do things like creating smart contracts that lock up users’ crypto assets as collateral for loans. Firstly, the retail players in the market, for the most part, have no sophisticated, defined or even useful and productive uses for capital. This immediately introduces a problem akin to adverse selection. In addition to this the anonymity we often hail as good, now provides us a situation where, due to insufficient defi history, we cannot now tailor rates to that user based on credit history.
Let us fast forward perhaps ten years. We now have a situation with defined Cryptoasset laws and regulations, a world in which real world assets are being tokenized, currency values are fairly stable and institutional infrastructure is readily available. User’s addresses, for example, could build-up credit histories and they could stake ownership of real-world assets to smart contracts to access immediate liquidity from competing parties globally that would be instantly available.
You can book your tickets to see Brenton at DeFi of Everything for Everyone, Virtual Summit, this upcoming April 14th and 15th, completely online. Check here for details: https://bit.ly/DeFi4Ee
About DeFi of Everything:
DeFi of Everything was created as the convergence of a myriad of organizations, startups, co-founders, executives, and researchers to expand the knowledge of decentralized finances looking to augment its adoption worldwide. Visit us at defiofeverything.com