The 7 Wonders of the DeFi World
7 things that were impossible, impractical, or unheard of before DeFi
We’re speedrunning the entire history of Finance, experimenting and iterating at a pace and volume that makes industry incumbents uneasy. Here’s a list of game-changing innovations that have financial services middlemen feeling a bit nervous and bewildered.
The AMM
Uniswap’s Automated Market Maker is what really smashed Pandora’s box, if you know what I mean. This simple money robot completely removed the need for centralized clearinghouses and liquidity custodians. Curve is another noteworthy mention, as well as a new project coming to Fantom from @AndreCronjeTech and @danielesesta.
Oracles
Oracles like Chainlink have built a way to decentralize truth itself and enabled smart contract functionality that removes the need to trust mere mortals for data accuracy and availability. The ability to guarantee price accuracy for basically anything and the ability to trustlessly verify that an event occurred is another really big deal that makes lots of other DeFi products possible.
Yield Aggregators and Auto-Compounders
People used to call their brokers if they found a better yield on their assets. Now we use platforms like Yearn.finance where the robots tell us where our assets should be working and just do it for us.
Want to compound your staking rewards? That’s automated too on platforms like beefy.finance. You’re also compounding almost all of the value that used to be paid out to middlemen and money managers.
Self-repaying Loans
Put your checkbook away, boomer. Alchemix Pioneered a way to allow the interest earned on staked assets to be used to pay down your loan’s principal. Never in traditional finance, ever, could you borrow money with a negative interest rate.
Protocol-Owned Liquidity
The team at OlympusDAO realized the self-defeating nature of liquidity mining incentive programs and developed a mechanism to purchase LP tokens from the community with the goal of owning 100% of their own liquidity. This seemingly minor change in tokenomics has proven to be the best strategy for creating resilient, long-term protocol growth that’s unencumbered by excessive token emissions. This new way of retaining and self-managing more of the protocol’s value is being adopted by many other leading and upcoming DeFi protocols, as well as from other industry sectors very quickly and could likely become part of a standard tokenomic model for all the best community supported protocols and projects. Some interesting ones we’re watching are Convex.fi and Redacted Cartel
Options Vaults And Crypto Hedge Funds
Options trading has always been a niche industry dominated by extremely bright math kids with lots of financial knowledge. Now you can take your uncle’s money and just punt it into Protocols like Ribbon.finance or DOPEX, where it’ll be managed by professional robots.
Meanwhile, projects like Enzyme.finance are demonstrating that anyone that feels like it can start their own hedge fund in about 10 minutes, and that it can be managed part-time for much less than the 6 figure salary plus performance fee that typical fund managers think they’re worth.
NFT-backed lending platforms
Getting a loan for a piece of art you have in your house is an old idea, but getting a 60% loan-to-value on a multimillion-dollar digital picture like you’ll be able to do on platforms like Jpeg’d is something we’re just starting to get used to. No one has ever staked a painting IRL. This will expand quickly beyond just PFPs to include music, sports collectibles, and other assets we haven’t thought of yet. As NFTs become more liquid and develop better pricing and yield generating mechanisms, NFT-collateralized lending will continue to morph into something unrecognizable from anything in the traditional finance world.
Conclusion
This generation will have a greater understanding of finance from a much younger age than ever before in history. Equipped with these tools, personal wealth management will become as easy and routine as tooth brushing.
Every sector of traditional financial services will sooner or later be dismantled, reconstructed, and launched on-chain as a much more efficient version of its traditional self. Completely new tools and mechanisms will be built up around the existing services.
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