I am wondering if DeFi is one of the first real use cases for blockchains.
Clearly so far we have had:
- The use of bitcoin as money
-- using the money aspect for gambling (to me this is not a different use than money)
- Trading and investment vehicle
- Fundraising tool (ICO)
- some games and game assets
But when it comes to real usage I have to admit I am not seeing much.
DeFI clearly offers some solutions that traditional finance cannot. Are you able to get 10% interest on cash, with very low risk (i'd argue with less risk than putting money into a bank)?
No very clearly not. The reason you can do this with DeFI is simply because the interest rate is a determined by real market forces.
In this case how much people are supplying and borrowing. Interestingly this natural supply and demand is very artificial, due to the fact that the creation of of stable coin such as DAI via collateral at a high interest rate only makes sense because of a high tax rates. I.e. in the US taxes are 37% + a state tax ranging from 0 to 7%. Capital gains taxes are much lower at 21%. If you plan to liquidate some crypto that you gained as profits it may make sense to defer via a loan and saving 20%ish in taxes (paying 21% vs 40+%). This allows the interest rate on such loans to be so high (currently 12.5%).
On the flip side gaining 10% just buy holding DAI, is an insane amazing new use case. The thing is that this is not possible on wall street.
DeFi opens up financial innovation to the world and creates use cases that were not here before.
So are you capturing some of this wealth opportunity?
If not, why not?
I personally have not put much value into DeFi projects. The key reason for me is I don't have too much cash right now. I know that is a lame excuse. I wish I could do this in my retirement account.
What about you?