Bards Lost in The Metaverse Episode 20 - Cryptocurrency Part 3: DeFi and the Future of Crypto
In this episode Sharn and Andy wrapped up their cryptocurrency mini series by talking about DeFi, dApps and the future of crypto.
To start off though, there was live recording of Sharn and Andy trying to set up crypto wallets, resulting in Andy getting a crypto.com wallet, and Sharn getting a Coinbase wallet.
Sharn and Andy then kicked off the actual episode and covered DeFi, dApps, DeFi tokens, and the future of crypto. Below are the consolidated notes for these topics:
Decentralized Finance or DeFi
DeFi (or “decentralized finance”) is an umbrella term for financial services on public blockchains, primarily Ethereum. With DeFi, you can do most of the things that banks support — earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more — but it’s faster and doesn’t require paperwork or a third party. As with crypto generally, DeFi is global, peer-to-peer (meaning directly between two people, not routed through a centralized system), pseudonymous, and open to all.
Why is DeFi important?
DeFi takes the basic premise of Cryptocurrency — digital money — and expands on it, creating an entire digital alternative to Wall Street, but without all the associated costs (think office towers, trading floors, banker salaries). This has the potential to create more open, free, and fair financial markets that are accessible to anyone with an internet connection.
The current traditional financial system is referred to as Centralized Finance:
This is where money is held by banks and third parties who facilitate money movement between parties, with each charging fees for using their services. A credit card charge starts from the merchant and moves to an acquiring bank, which forwards the card details to the credit card network.
The network clears the charge and requests a payment from the bank. Each entity in the chain receives payment for its services, generally because merchants must pay for the use of credit and debit cards.
All financial transactions are overseen in centralized finance, from loan applications to a local bank's services.
Where as Decentralized Finance:
eliminates intermediaries by allowing people, merchants, and businesses to conduct financial transactions through emerging technology. Through peer-to-peer financial networks, DeFi uses security protocols, connectivity, software, and hardware advancements.
Wherever there is an internet connection, individuals can lend, trade, and borrow using software that records and verifies financial actions in distributed financial databases. A distributed database is accessible across various locations as it collects and aggregates data from all users and uses a consensus mechanism to verify it.
Decentralized finance eliminates the need for a centralized finance model by enabling anyone to use financial services anywhere regardless of who or where they are. DeFi applications give users more control over their money through personal wallets and trading services that cater to individuals.
Note: Only runs on blockchains with smart contracts (not Bitcoin).
What are the benefits?
Open: You don’t need to apply for anything or “open” an account. You just get access by creating a wallet.
Pseudonymous: You don’t need to provide your name, email address, or any personal information.
Flexible: You can move your assets anywhere at any time, without asking for permission, waiting for long transfers to finish, and paying expensive fees.
Fast: Interest Rates and rewards often update rapidly (as quickly as every 15 seconds), and can be significantly higher than traditional Wall Street.
Transparent: Everyone involved can see the full set of transactions (private corporations rarely grant that kind of transparency)
What are the downsides?
Fluctuating transaction rates on the Ethereum blockchain mean that active trading can get expensive.
Depending on which dapps you use and how you use them, your investment could experience high volatility – this is, after all, new tech.
You have to maintain your own records for tax purposes. Regulations can vary from region to region.
Lets talk about dApps baby, lets talk about crypto and me..
So what Are Decentralized Applications (dApps)? Decentralized applications (dApps) are digital applications or programs that exist and run on a blockchain or peer-to-peer (P2P) network of computers instead of a single computer. DApps (also called "dapps") are thus outside the purview and control of a single authority.
DApps—which are often built on the Ethereum platform—can be developed for a variety of purposes including gaming, finance, and social media.
Can only exist on blockchains with smart contracts.
dApps have been developed to decentralize and disintermediate a range of functions and applications. These include things from self-executing financial contracts to multi-user games and social media platforms. DApps have also been developed to facilitate secure, blockchain-based voting and governance, DApps can also be integrated into web browsers to function as plugins that can help serve ads, track user behavior, and solicit crypto donations.
Some examples of practical uses for dApps include:
Supply chain management
What are some of the most popular/well know Defi tokens
The best DeFi project will vary greatly based on a particular investor's goals. Most DeFi projects specialize in different areas so it's important to consider what one is looking for prior to investing.
DeFi tokens represent a diverse set of cryptocurrencies native to automated, decentralized platforms that operate using smart contracts. These provide users’ access to a suite of financial applications and services built on the blockchain.
Lido Staked Ether
Go to https://crypto.com/price/categories/defi for a really good breakdown. It will tell you what it is, its history, how it works, what it's used for and has a copy of its whitepaper etc.
Future of Crypto
Professional predictions for the next year or so:
A Lot More Investors Will Adopt Bitcoin
Ether Will Outperform Bitcoin Again:
Most meme coins will disappear
Use in Web
Web3 gets fashionable
Don’t count out NFTs
Gaming continue to grow
The big exchanges become “disaggregated.”
Bonus prediction from professionals: that the rise of generative AI, might lead to blockchain playing a significant role in helping us to distinguish between content created by AI and content created by humans. - OpenAI statement released today
Predictions for the next 10 years!
Over 40% of the world will own some crypto or stablecoin
Bitcoin will overtake gold for total market cap
Satoshi Nakamoto will become the first trillionaire
Big Real Estate tech companies will allow you to purchase homes with crypto
Programmable money puts the planet’s resources to work
Big Tech will reign supreme
Money gets weirder
Cryptocurrency is essential for the world of web3 and the metaverse, so it is essential to understand it.
Online transactions may change to using crypto or at least will use DeFi systems.
DeFi will change the mechanics of international banking. Financial institutions will invest in DeFi and embrace it as the backbone of their business.
NFTs are not going away, and crypto currency is required to facilitate that economy.
Prior to increased interoperability across metaverses and markets, exchanges will improve and become essential to enable consumers to easily interact with various online communities.
Crypto will move further away from its anti-establishment/decentralized themes and become much more governed and similar to digital FIAT money as we know it.
As always, we have a lot to do and a lot more to learn. Hope you all have fun following along as we improve our understanding and knowledge!
You can find this podcast episode (and all our other episodes) here: https://anchor.fm/invokecreations , or directly on your favourite streaming services.
NOTE: Everything discussed during the podcast is simply our own interpretation of information we come across as we research topics, or is commentary based on our own personal experiences. We highly encourage everyone to conduct their own research into topics of interest as information, especially in the technical space, changes regularly.
Music track featured this week was titled Hygge Tea and can be viewed/listened to here: https://www.youtube.com/watch?v=VMVCn75RcZc
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As always, we’re off to put our bums on seats and do some work, so until next time stay dangerous!