Vitalik is right. Partially.
Current DeFi is gamified finance where skilled users extract money from less skilled users.
This doesn't scale.
But there are solutions π§΅π
Current DeFi is gamified finance where skilled users extract money from less skilled users.
This doesn't scale.
But there are solutions π§΅π
https://twitter.com/VitalikButerin/status/1827642283560144916
The term "tuition" in DeFi refers to losses taken that users learn from.
I.E., if you get liquidated (like me) for over-leveraging an LST using a market rate oracle, those losses become "tuition," and you'll (probably) only leverage with exchange rate oracles in the future.
Most successful defi users (i.e. "winners") have paid their fair share of tuition to reach their current level of experience.
The problem is, almost everyone who's paid their tuition graduates and competes for the same job of "winner."
I.E., if you get liquidated (like me) for over-leveraging an LST using a market rate oracle, those losses become "tuition," and you'll (probably) only leverage with exchange rate oracles in the future.
Most successful defi users (i.e. "winners") have paid their fair share of tuition to reach their current level of experience.
The problem is, almost everyone who's paid their tuition graduates and competes for the same job of "winner."
Imagine an incredibly tough university that pays a phenomenal salary.
Many students drop out because of how difficult it is or because they can't afford tuition any longer.
The students who do graduate are highly skilled and educated.
Great!
But there's a catch: all of the graduates want to become professors in that university.
Many students drop out because of how difficult it is or because they can't afford tuition any longer.
The students who do graduate are highly skilled and educated.
Great!
But there's a catch: all of the graduates want to become professors in that university.
Sure, the university can hire more professors and open more classes, but the tuition from new enrollments cannot keep up with cost to employ every new graduate.
So even though you've created highly-skilled, highly-competent, highly-educated professionals, there's not enough money to hire them all.
So to is DeFi in its current state.
So even though you've created highly-skilled, highly-competent, highly-educated professionals, there's not enough money to hire them all.
So to is DeFi in its current state.
There is now a critical mass of savvy DeFi "graduates" all competing for the title of "winner" in this PvP crypto arena.
Occasionally our "university" gets a big grant from a chain, VC, or DAO that keeps us all paid for a few months, but those investors are expecting a return that's always correlated with new "students" paying more "tuition."
And once the expectation of new students (defi users) goes away, so too will much of the funding that pays us "professional" power users.
Occasionally our "university" gets a big grant from a chain, VC, or DAO that keeps us all paid for a few months, but those investors are expecting a return that's always correlated with new "students" paying more "tuition."
And once the expectation of new students (defi users) goes away, so too will much of the funding that pays us "professional" power users.
This is why we need external revenue.
We need a source of new money that isn't just onboarding inexperienced users.
Let's talk about TradFi Yields.
We need a source of new money that isn't just onboarding inexperienced users.
Let's talk about TradFi Yields.
In Traditional Finance there are many ways to get yield.
Here are a few of the big ones:
Note: I've put the defi equivalent in parenthesis
1. Dividends (i.e. revshare)
2. Bonds (interest on lent capital)
3. Mutual Funds (managed vaults)
4. Funding Rates (funding rates)
5. Credit Markets (Goldfinch / Centrifuge)
Here are a few of the big ones:
Note: I've put the defi equivalent in parenthesis
1. Dividends (i.e. revshare)
2. Bonds (interest on lent capital)
3. Mutual Funds (managed vaults)
4. Funding Rates (funding rates)
5. Credit Markets (Goldfinch / Centrifuge)
As you can see, most major yields from tradfi already exist on chain.
And some protocols are even bringing those tradfi yields directly onchain.
β’ onchain treasuries (USDM, sDAI, USDY, etc)
β’ onchain credit markets (USDz)
β’ onchain mutual funds (Franklin OnChain)
And this is really just DeFi's second cycle.
And some protocols are even bringing those tradfi yields directly onchain.
β’ onchain treasuries (USDM, sDAI, USDY, etc)
β’ onchain credit markets (USDz)
β’ onchain mutual funds (Franklin OnChain)
And this is really just DeFi's second cycle.
So I'm hopeful. In fact, I'm incredibly bullish on DeFi.
In a few years, I believe we'll have every major type of tradfi yield onchain, decentralized, and accessible to anyone in the world with a VPN and an internet connection.
This will also mean more users, more mindshare, and more innovation.
In a few years, I believe we'll have every major type of tradfi yield onchain, decentralized, and accessible to anyone in the world with a VPN and an internet connection.
This will also mean more users, more mindshare, and more innovation.
I expect other RWA markets to take off.
@landxfinance has tokenized crop yields.
Various projects are tokenizing real estate yield.
Soon I imagine small, medium, and large businesses will find a way to tokenize their own revenue in legal and robust manners, allowing anyone to participate in speculative angel investing.
@landxfinance has tokenized crop yields.
Various projects are tokenizing real estate yield.
Soon I imagine small, medium, and large businesses will find a way to tokenize their own revenue in legal and robust manners, allowing anyone to participate in speculative angel investing.
Polymarket is one of the most interesting breakthrough defi use cases.
It simultaneously acts as a prediction "oracle" for events while also offering users a decentralized speculation market on real-world events.
Soon, I anticipate the tokenization of speculative positions in these markets and various forms of yield therein.
With sufficient liquidity, polymarket could become the most reliable "wisdom of the crowd" indicators on Earth.
It simultaneously acts as a prediction "oracle" for events while also offering users a decentralized speculation market on real-world events.
Soon, I anticipate the tokenization of speculative positions in these markets and various forms of yield therein.
With sufficient liquidity, polymarket could become the most reliable "wisdom of the crowd" indicators on Earth.
FINALLY,
Let's never forget the true heart and soul of DeFi.
Decentralized Finance.
The ability to own your own assets in a completely non-custodial way.
DeFi means:
βΊ NO BANK
βΊ NO GOVERNMENT
βΊ NO INSTITUTION
can freeze or seize your funds without your express permission.
I believe there will be a time in the not-too-distant future where international undesirables will be subject to financial warfare. DeFi is the only true safe haven.
DeFi allows you to own your money and do with it what you'd like without severe institutional exploitation.
This is real financial freedom and real financial agency.
Let us never lose sight of that.
Let's never forget the true heart and soul of DeFi.
Decentralized Finance.
The ability to own your own assets in a completely non-custodial way.
DeFi means:
βΊ NO BANK
βΊ NO GOVERNMENT
βΊ NO INSTITUTION
can freeze or seize your funds without your express permission.
I believe there will be a time in the not-too-distant future where international undesirables will be subject to financial warfare. DeFi is the only true safe haven.
DeFi allows you to own your money and do with it what you'd like without severe institutional exploitation.
This is real financial freedom and real financial agency.
Let us never lose sight of that.
β’ β’ β’
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