What I’m most excited about is the promise of decentralized finance (“DeFi”), specifically how on-chain lending can be the use case that will bring the next billion Web2 users to Web3.
Traditional finance was the lifeblood of the global economy, but it is failing us. Rooted in pre-internet paradigms, TradFi is a black box, especially when it comes to access to capital. By providing transparent, efficient, and global access to on-chain capital, I believe DeFi offers a real, compelling value proposition for the next billion Web2 users.
#Why does it excite you?
DeFi offers the opportunity to redesign the global financial system from the ground up: natively global, digital and composable. On-chain lending in particular has become a growth engine for the nascent on-chain financial system. On-chain lending eliminates the inefficiencies in the depositors → banks → borrowers value chain and upgrades them on-chain to depositors → smart contracts and liquidity pools → borrowers. A new cost structure with near-zero marginal, operating and labor costs will be introduced for financing.
#What is the potential in this area that you think will have the most impact on people? Why?
DeFi’s transformative power will be fully activated as DeFi’s efficient infrastructure is brought to real-world lending, opening up a $2.5 trillion household loan market to DeFi.
However, there is one major gap before on-chain lending can go mainstream in the real world: identity (or lack thereof). Borrowers today are required to post crypto collateral as identity-centric, risk-based underwriting is not available. Built entirely on collateral, this brokerage model undermines the benefits of financial inclusion and requires users to be both “crypto-rich” and “cryptonative.”
Therefore, at Masa, we are focused on building web3’s first identity protocol. 1.5 billion people worldwide have creditworthiness, and 3.3 billion people are “credit invisible”, meaning they are creditworthy. Yet their credit history is not associated with them in the traditional banking systems. For the first time, an on-chain identity with Masa can give the 3.3 billion credit-invisible people access to a global pool of liquidity.
Additionally, our latest project regarding Soulbound tokens has been incredibly well received by our core Web3 native community. To date we have produced 50 SBT credit reports and produced 15,000 SBT mints. We’re thrilled to see the positive user response to this and excited to see how Soulbound tokens will continue to inform the Masa mission.
#What are the disadvantages of DeFi?
During the past cycle, we have seen a lot of speculative, highly leveraged, or pure yield farming activity in DeFi. Contagion via centralized DeFi lenders over the past few months has given the community a bad rap. At Masa, we’re excited to bring DeFi’s efficient infrastructure to real-world lending and bring real, tangible use cases to the next billion users.
#What are your forecasts for the development of DeFi?
DeFi cannot and will not remain in its own echo chamber. DeFi’s transformative power will be fully unleashed when DeFi’s efficient infrastructure is brought to real-world assets. Leveraging the efficiency of DeFi to resolve real financial hurdles will fuel the next bull market.
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