How Representative Currency Can Change DeFI

chekohler (70)in #money • 4 years ago

Hey Jessinvestors

Like it or not, Bitcoin is money as long as their's enough wackjobs like myself who believe in it, it will be money and it will remain money as long as we can pass on that belief to more people and future generations. Bitcoin does one thing very well, and that is storing value since it got 10+ years of building towards this point, and it has a very limited supply, and it's becoming harder each year to mine or buy.

The game theory is backed into the protocol, and with the new inflation rate, the price of BTC will continue to move up when compared to other stores of value and HODL'rs will not want to part ways with their precious coin.

As the world continues to decide on what will be the best way to have a store of value that you can own and manage at scale, Bitcoin provides the best solution thus far.

Making Bitcoin work even harder

Bitcoin works for HOLD'rs its deflationary nature has given the majority if not all long term holders a return on their investment. However, unlike stocks that can pay dividends by turning collateral into working capital or assets that bring you interest, Bitcoin only grows in value when saved, and this is why DE-FI comes into play, which is active use of capital.

I've used custodial services like crypto.com, Celsius Network and BlockFi to put a portion of my BTC to work and earn interest. Still, the problem is, these companies own my currency, they just promise to return it and offer insurance in case of failure to return capital.

This isn't very different from banks apart from offering you a favourable interest rate, and I think its only a bridge tot eh new DE-FI space with the power of the representative currency.

Representative Currency

Image source: - boycewire.com

Enter De-FI

DE-FI has now become a popular sector for blockchain,. Still, it so heavily rests on you buying another shitcoin that needs to have liquidy and a market to buy and sell into, I think DE-FI projects are missing the point by having native currencies and should be focusing on representative coins instead.

Why not keep the real thing?

The representative version of DE-FI I think is where the real promise lies and will clear out so many shitcoins that aren't needed, especially int eh ERC-20 ecosystem. Representative currency allows you to retain ownership of your coins but get an allocation of another token that represents your token. The Liquid Network and Lightning Network is a prime example of representative currency; it takes BTC and locks it into a second layer to be be used for things BTC cannot do on-chain.

This provides you with the best of both worlds, the security, value, liquidity of the main currency like BTC but also has access to new financial options that smart contracts can provide without having to update proposals.

My dream is to one day have hot or cold wallets that have access to P2P smart contract networks where people can "stake" or "delegate" their Bitcoin or other cryptos to back companies or individuals with collateral they can use to drive economic value and provide a return on investment.

What about HIVE-FI

Apart from dlease.io there aren't any dApps in HIVE focusing on DE-FI space which I think is a significant missed opportunity to provide more utility for the token. Since HIVE already has the delegation model built into the protocol it can open up opportunities natively much easier than other chains for non-custodial DE-FI.

I think the first step would be to piggyback off applications like Celsis network, crypto.com and users can invest their HIVE with other companies and not only on this chain.

Next, we should be looking at getting on to payment options like Bitpay, Tenx, PundiX, Crypterium as a payment method that settles instantly with POS systems so people can use a crypto card to spend their HIVE or HBD.

Then we should look at building our applications that use HIVE as collateral for things like fiat loans so that people in certain countries can access fiat from their HIVE; this could be done on a P2P basis too for better competition and returns on capital.