Decentralized Finance (DeFi) Is Everything

over 2 years ago (Edited)

We still operate in a world that puts things in different compartments. Unfortunately, that goes counter to technology which tends to converge things together.

This is something we see in different businesses. If we look at most publicly traded companies, we can tell what sector they are in. One will be in retail while something else will be in automotive. However, if we ask an executive at a technology company "what business are you in", the answer is "any one we want".

The point is that technology helps to transcend boundaries. Things that are nicely organized get completely upended when technology is involved.

For this reason, it is vital to look at what is taking place in cryptocurrency, not from the financial perspective but rather, the technological.

We are dealing with programmable money and then some.

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Internet Of Value Exchange

What is the next generation Internet? This is a topic that gets a lot of discussion. We also come up with a wide range of answers. It seems everyone has a different idea, none of which are truly wrong at this point. This is a period of design and development meaning the path is still being forged.

The obvious point is we are moving into Web 3.0. It is a term we hear tossed around of lot but what does it mean?

One of the key components is going to be this: it will be the Internet of Value Exchange.

We are certain to see the Internet where value is going to be captured and transferred. What value you might ask? All of it.

This is where blockchain and cryptocurrency are taking us. We are able to apply value to whatever is desired. This can be in the form of a traditional cryptocurrency or a NFT that is applied to only a individual item. What is powerful is this will apply to both physical and virtual assets.

It is safe to say the process of "digitizing" real world assets is underway. This is just getting started. Over the next half decade, large steps forward will be realized. This coincides with the creation of a digital layer across our physical realm. With sensors going in by the billions, we are seeing things such as digital twins becoming a reality.

All of this is converging at the same time.

DeFi Is Not Finance

There is a lot of discussion about decentralized finance and how a parallel system is being constructed. We focus upon what is in the traditional financial world, then look to mirror it in many ways. Of course, the major difference is that we seek not to create more centralized entities controlling everything.

That said, this is the first generation based upon our mental reference points. This is very typical with technology.

For example, when the personal computer was first entering the work environment, people were uncertain what it was. Therefore, they had to frame it in a way they could comprehend. Thus, the first wave of personal computers, to those people, were advanced typewriters that allowed them to save their work.

As we are all aware, the computer is (and was) a lot more than that. However, that is the way things operate. We harken upon the reference points we have and build based upon that. It is no surprise that word processing, i.e. document creation, was one of the first, real world, use cases for personal computing.

This is no different. Decentralized finance, as a technology, is just starting to sprout. Ultimately, it is going to be one of those converging forces.

When asked what does decentralized finance apply to, the answer will be "everything".

At present, we are seeing infrastructure being developed. This is going to take another couple years at a minimum. We have a lot of construct before we have something that is viable. However, once the foundation is in place, we are going to see DeFi expand into everything.

Essentially, it is the basis for Web 3.0. The core of the next generation Internet is the Internet of value exchange.

Tokenization Of Everything

If DeFi is in everything, that means that anything can be tokenized. This is a concept that was discussed for a number of years.

Now, we are seeing the practicality of that starting to emerge. There are opportunities cropping up everywhere we turn. Mainstream companies are beginning to realize how they need to be involved in this.

For example, we have traditional gaming companies embracing the #Play2Earn idea. Certainly, if they are going to succeed long term, they will have to adapt and tokenize their games in some form.

The basic essence of the future is "pay me". This might sound a bit cold but it isn't as it seems.

We are dealing with the attention economy. When everything is tokenized, people are valued for their time, efforts, and attention. Where they choose to focus is going to be rewarded.

Also, the tokenization process is going to be a unifying mechanism. Our present system is exclusionary. This is not going to be the case in the next decade. By that time, the walls of separation that exist within the financial world should have been torn down. Even if regulators insist on trying to control, as they do now, we will see develop build right around them. Decentralization is going to be a key factor moving forward.

What this does is enable people to leverage the knowledge of others while getting involved in very profitable situations. For example, with real estate, often the most beneficial projects, from a financial perspective, were the most expensive. Some of the world's richest people grew their wealth through real estate, development in particular. They were able to build huge developments across a particular geographic region. Whether residential or commercial, this is not a low-end operation. There is plenty of money required as well as expertise.

Naturally, most of us are exempt from this. Other than, perhaps buying stock in a publicly traded home builder, we are on the outside looking in. Someone else is going to make the money.

Not so with tokenization. Here we can see a clear way that anyone can get involved. Since DeFi will be in everything, the focus or effort in one area, which translates into tokens, can be shifted into another area. Stated another way, the value we garner in one (or many) area can be transferred into a real estate project that offers tremendous returns. While our stake might be small, it will allow us to individually benefit. We will partake from the expertise and abilities of others.

Thus, we can see how the digital layer of the world that is being created is also going to have decentralized finance interwoven throughout. The fact that most everything will end up tokenized ensures this.

Someday people will ask, "what business are you in" and you will reply "anyone I want".

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