Diffusion Digital: Financing real-world assets with DeFi — 07/28
DeFi saw — and is still seeing — an unprecedented surge last year as the community widely adopted it due to its swift operations, high-yield opportunities, and convenience over legacy investment instruments. However, despite its enormous potential and already broad ecosystem, there are still gaps that DeFi has yet to fill. One of them is bringing physical and real-world assets on-chain, and on July 28th, we had the fantastic opportunity to discuss that topic with industry experts. Here are the talk’s best highlights.
Voices worth hearing
Titan’s CMO Lewis Farrell integrated a terrific panel moderated by Rumi Morales from Outlier Ventures — the event organizer. Joining them, we had:
- Kristy-Leigh Minehan: Former CTO of Core Scientific.
- Sidney Powell: CEO & Co-Founder of Maple Finance.
- Dimitrios Chatzianagnostou: Founder of Tokenfabrik.
The potential of DeFi for real-world assets
DeFi is changing the world of both personal and global finance. By cutting out the middleman, it enables anyone to share in a worldwide economy regardless of their geographical location or account size. All they need is an internet connection.
Furthermore, DeFi not only allows the inclusion of more people into the system. It also provides a platform for entrepreneurs and investors to access different financial markets without relying on the approval of a single institution. Or, as Kristy-Leigh Minehan put it, “the emergency of DeFi has opened up a variety of opportunities for real-world infrastructure to be funded by alternative lenders and alternative sources.”
However, there’s still a long way to go for decentralized finance, especially capturing non-crypto-savvy audiences. And bringing real-world assets to the space could do the trick, according to Dimitrios: “The way DeFi is today is quite like an echo chamber. We need to build the next frameworks to connect DeFi to move physical things instead of having only cryptocurrencies and protocol tokens.”
Current challenges
If there’s such a need for real-world assets in DeFi, how come it hasn’t happened yet? According to Sidney, there’s a few basic conditions that just now we are starting to fulfill, like sufficient liquidity for those assets and a considerable stablecoin volume to support that liquidity.
Dimitrios also pointed out that we’re still in the very early stages of DeFi, and that the continuous innovation we saw last year won’t stop anytime soon. “Protocols have become safer. TVL is growing, and so is trust.” Furthermore, he highlighted the importance of onboarding solutions allowing institutional liquidity to come into the space and the need to build open and transparent processes focused on trust-building frameworks to support the integration of real-world assets to grant security and confidence to investors.
Kristy, on the other hand, went for a more straightforward approach. She argues that we need three things: Education, in the first place, to avoid misunderstandings and dispel misinformation. Secondly, a regulatory framework to clarify the rules for investors. And most importantly, time for people to understand what DeFi is and why it is a better alternative to traditional finance.
To close this topic, Lewis explained that we need to make the transition from legacy finances to DeFi as swift as possible: “DeFi has to become like a utility: you take it, you plug it in the wall, and then it just works. And we’re not quite there yet.” He added that as we move forward on that matter, we’ll find new ways to integrate one with the other, so they both complement each other for the maximum benefit of users.
The particular case for mining: Commoditized hashpower
One of the most exciting topics was how we could bring proof-of-work resources to DeFi. Being Titan’s specialty, Lewis spoke about how we are solving this issue.
“Say a mining pool has fifty thousand mining rigs. You’ll be able to come in, set up fifty thousand smart contracts that then allow you to sell that hashpower. Each of those smart contracts will have a corresponding NFT which has a 1:1 identity with a physical mining rig,” he explained. “When you own that NFT, you essentially own the control of that mining rig.” Indeed, there’s a unique opportunity not only to trade hashpower on-chain but also to create a lending and borrowing system for physical mining equipment.
If you want to read more about using NFTs as remote mining hardware ownership, click here.
Kristy quickly added that the mining ecosystem is already exploring the world of DeFi to find funding sources. Indeed, financing a crypto mining operation — including hardware and infrastructure — from scratch can take up to thirty million dollars. The advantage DeFi provides in this aspect is frictionless capital, meaning that borrowers don’t have to deal with cumbersome paperwork or bureaucracy, pointing out that “that frictionless capital has enabled the landscape to double or even triple in size in the least year and a half.”
Tackling FUD: Energy, sustainability and government regulation
Of course, you can’t discuss cryptocurrency mining without mentioning the environmental FUD and misinformation surrounding it. Once again, our CMO stepped up to clarify an already well-known reality.
“The number one driver for a crypto miner is cheap electricity, and since 2019, the cheapest form of electricity is renewables,” he explained. That said, what we see now with miners moving away from China is a growing interest in that kind of energy like solar, wind, or hydroelectric. Lewis mentioned that miners “are providing incredible investments into those industries now,” and he thinks that “we’ll see that accelerate” even more. He believes that, from now on, we’ll only see crypto mining becoming cleaner and more eco-friendly.
Sidney complemented Lewis’ argument by saying that “spending more energy is a sign of growth, so we shouldn’t be focusing on how much we spend rather than doing it in better, less impactful ways.” On that note, Kristy added that “it isn’t true that we could be utilizing this energy for better purposes.” In fact, the energy used for mining otherwise sits idle. There is no other form of computation that can consume that energy at that scale.
Indeed, as technology improves and becomes more efficient, all the infrastructure built before to support more energy-consuming equipment starts to sit idle. Thus, Kristy thinks we should be grateful for crypto, as it “is the only market right now that can put this to use. That is what efficiency means, putting these resources to work.” She assures that there is an astronomical amount of energy wasted per year and that only the crypto industry can take advantage of it.
Getting people involved
In the last section of the panel, Rumi asked the speakers to close with some words of inspiration and motivation.
Everyone agreed that DeFi is the place to go for people who enjoy taking up complex challenges and have a knack for innovative problem-solving. As mentioned before, it is a new, still-in-discovery industry, and the true reach and potential of DeFi are yet to be determined.
“This is an amazing time. We’re at a point of frictionless infrastructure. Anyone on the planet can spin up a new application in less than twenty-four hours and deploy it globally. That means that anyone can come up with a solution,” said Lewis, stressing the ease of access DeFi provides.
Kristy had the last word, and she made good use of it: “No one is in crypto because they have to be. Everyone is in crypto because they want to be. That dramatically changes the energy of this space. Passion is motivating everyone. It’s addictive, and there’s nothing like it.”
Closing thoughts
We want to thank Outlier Ventures for inviting us to this fascinating discussion with some of the industry’s bests. As we always say, we cherish every chance we have to participate in the debate and engage with the crypto community.
We hope that this conversation brings insight into the ecosystem to those still discovering it and motivates them to dive deeper into cryptocurrency’s unique world.
We’re looking forward to our next conversation and hope to see you there.
The Titan Team
