Take a look at the massive amount of growth of the total value locked in Defi. This gives great insight into just how big this category of finance has grown within one year.
Why is this important?
Crypto and defi is the first step to opening people’s minds to understanding how systems currently work, how and where they store their money, what they support and enable by doing so, and how they can build and replace these systems.
There are some core systems which need upgrades to increase their trust, efficiency, and by doing so increase the average person’s quality of life. Defi uses transparency to provide a way to track money flows. This could provide a lot of benefit for core systems: Food, water, shelter, insurance, finance, legislation, government, and healthcare. Defi is the first step by re-building and thinking about finance.
- People need to take over these core pillars of being alive and re-work them if they want to have more control over their quality of life
- Lots of the problems which exist around these are the market dynamics. People need to change the market dynamics to favor regular people.
- Defi encourages creativity around narratives and tools. One way to have a big impact in the space is to provide lots of resources and ways for people to learn easily.
- There is a way to discourage the most extractive people among us while still enabling people to make loads of money
What are current barriers to entry and risks?
- Wallets like MetaMask are getting easier to use, but still provide a somewhat difficult user experience. There is room for non-custodial wallets which stay true to the ethos of Defi while providing enhanced user recoverability (Argent, Linen).
- There is a risk of centralization of these solutions by having application governance co-opted by big players like exchanges, traditional finance, or wealthy individuals. People can know this and invest accordingly.
- There is regulatory risk around stablecoins due to government fear of losing control of the currency.
- There are lots of scams and mal actors, whether projects straight up steal funds without accountability or risks of novice token buyers getting eaten alive by gas fees and slippage.
Risks Today, what about tomorrow?
Defi does present an opportunity to front run a massive market. If Defi can capture a small portion of the global financial industry (>$1.0 Quadrillion), early investors will be rewarded. There is also the possibility that governments and intermediaries will have to change how they cooperate to be less extractive, and focus on providing value for those who use their services. These various aspects of our lives are massive liquidity pools, and can be drained and re-worked if they fail to take care of their liquidity providers.