Curve DAO (CRV) shows DeFi is Back in a Big Way
CoinMarketCap data shows interest in decentralized finance (DeFi) is back in a big way. For example, CoinMarketCap’s four most trending cryptocurrencies on 3 August 2023 were DeFi tokens.
Those tokens were Worldcoin (WLD), XRP (XRP) the coin formerly known as Ripple, the CurveDAO Token (CRV), and Litecoin (LTC). For example, Worldcoin is OpenAi chair Sam Altman’s questionable DeFi solution. XRP is a cryptocurrency and trading solution built for cross-border transactions, the CurveDAO is a swap and liquidity pool solutions, and Litecoin is payments solutions built for cross-border transactions. Tellingly, Litecoin’s creators arrogantly call their cryptocurrency “the future of money.”
Moreover, you can argue the fifth-most trending cryptocurrency Bitcoin (BTC), the granddaddy of all cryptocurrencies, is a DeFi app. To explain, I consider Bitcoin a decentralized system to store, transmit, and utilize money. Hence, I consider a DeFi solution.
Why is DeFi back?
Therefore, DeFi has retaken the cryptocurrency media-sphere from garbage meme coins such as Shiba Inu (SHIB) and the despicable Pepe (PEPE). Interest in DeFi is back, which shows the rumors of DeFi’s demise were exaggerated.
I think DeFi is back for two reasons. First, there is widespread dissatisfaction with the financial system. This dissatisfaction drives interest in Bitcoin, which promoters present as an alternative to the financial system. It also drives the popularity of Worldcoin, which Altman presents as a new financial system.
Dissatisfaction with the financial system is increasing because of growing income inequality, rising poverty, corruption, and the failure of financial institutions. In particular, many people can no longer access credit and make money in our financial system.
People have no access to Finance
Second, income inequality and structure block access to the financial system for many people. For example, excellent stocks are now too expensive for many ordinary investors. Mr. Market, for example, NVIDIA (NVDA), was trading at $447.50 on 4 August 2023.
Similarly, it is difficult for many ordinary people to get or use basic financial instruments such as credit cards, bank accounts, and debit cards. For example, 24.6 million US households were unbanked or under-banked in 2021, the FDIC estimates.
Therefore, I estimate around 76.998 million Americans have little or no access to the banking and financial systems. To explain, the average US household contained 3.13 people in 2021, the Population Research Bureau estimates.
Decentralized Finance (DeFi) for the Under-banked
To elaborate, unbanked means people have no bank account. Conversely, under-banked means people have limited access to the banking system. For example, a person who has a checking account but no credit cards because of a “bad credit rating.”
Many brokerages refuse to serve under-banked people with poor credit ratings. Hence, those people cannot buy stocks. However, those people can speculate in liquidity mining pools such as Uniswap (UNI), SushiSwap (SUSHI), CurveDAO (CRV), and Balancer (BAL). I think many people are liquidity mining because they cannot afford stocks or bonds.
Additionally, I consider many DeFi solutions banking alternatives. For example, you can consider liquidity pools a high-interest alternative to saving accounts. Likewise, many liquidity pools support lending schemes that offer easier access to credit.
Thus, frustration with the financial system drives interest in DeFi, which generates new DeFi solutions. Frighteningly, this frustration often drives people to questionable solutions such as Worldcoin, worthless products like Hippocrat (HPO), and fraudsters, including Sam Bankman-Fried of FTX infamy.
The Future of DeFi
I suspect the future of DeFi is solutions that connect decentralized finance (DeFi) to the traditional financial system.
For example, Quant (QNT) which supports Central Bank Digital Currencies (CBDCs). Quant is helping the Bank of England develop a digital Pound Sterling, a cryptocurrency version of Britain’s fiat currency. Moreover, Quant works with the Bank of International Settlements (BIS). The BIS is a cartel of central banks that supports central bankers with technology and other solutions.
Similarly, the WhiteBIT (BIT) token is a cryptocurrency that performs anti-money laundering (AML) checks and Know-Your-Customer (KYC) verification. WhiteBit follows regulations so it can operate in regulated financial markets such as those in the European Union and the United States.
The Final Frontier of DeFi
The Final Frontier of DeFi is a government backed solutions such as the Peoples Bank of China’s Digital Yuan (ECNY), and the Federal Reserve’s FedNow scheme. The ECNY is a CBDC for the People’s Republic of China. FedNow is a platform that connects banks and individuals to the Federal Reserve’s payment network. The hope is to support instant payments.
Consequently, I think the DeFi solutions that make the most money will be the ones that work with the traditional financial system, such as the Pax Dollar (USDP). I believe this contrarian thinking will help people make money with DeFi.
I predict DeFi contrarians who seek solutions that interface with traditional finance will prosper. Conversely, those who concentrate on standalone DeFi solutions, such as Bitcoin (BTC), will lose money.
Those who embrace government DeFi and centralization will make money. People who reject official DeFi will lose money.
In the final analysis, DeFi is here to stay. Therefore, all investors and speculators need to understand DeFi if they want to make money.
*https://www.fdic.gov/analysis/household-survey/index.html#:~:text=Key%20Findings,-National%20Unbanked%20Rate&text=An%20estimated%204.5%20percent%20of,the%20survey%20began%20in%202009.
*https://usafacts.org/data/topics/people-society/population-and-demographics/population-data/average-family-size/