New year, new efforts, new blockchain and cryptocurrency use cases to believe in.
The ETH Denver format: Each year at ETH Denver, hackers, sponsors, participating businesses and speakers capture the evolving use cases for blockchains and cryptocurrencies. Hacker- or builder-teams assemble to develop a blockchain project in a weekend’s time. On the final day, they present their concepts for the opportunity to win cash and prizes. Perhaps even more exciting for these participants is stumbling upon an opportunity to continue building their projects beyond the bounds of the competition. This year was no different, amazing projects were presented and eye-opening topics were discussed by esteemed guests.
As with each preceding year, ETH Denver proves to be a future-focused event. They even hosted a crypto-alphabet story time for children (literally the future), read by Ethereum’s Vitalik Buterin, Colorado Governor Jared Polis and Wyoming Governor Mark Gordon. I mean, how strange is this image of the future… I love it!
Polis and Gordon are, I might add, contributing some of the most impactful narratives and legislative changes on blockchains’ role in business and government.
Each year seems to dawn a new hype and excitement in the world of blockchains, and this year was all about the DeFi, decentralized finance.
A full day covered the broad reaching and enlightening areas of DeFi — everything from disrupting the financial system, to social impact, to new and advanced technologies. DeFi certainly stole the show and is giving new hope for blockchainers wanting a winning horse to bet on. This horse however, will need to run the disruption-marathon and not a moonshot-sprint.
So, What is DeFi?
Think of DeFi as a movement of financial applications and services that are built on blockchains for the purposes of decentralizing control, improving transparency, enhancing security and generally making wealth generating tools more accessible (i.e., less exclusive).
Admittedly, the focus for my own education and excitement at ETH Denver this year was also with DeFi. DeFi is proclaiming a wider, more institutional use case for blockchains that has promise for larger scale adoption and product-market fit. Why?
- Many people have cryptocurrencies ($275–300B market cap, Feb ‘20)
- Cryptocurrencies (that are not pegged to a fiat or stable) are bad as spending money and are anxiety inducing to hold
- The value locked up in these cryptocurrencies, and the secure blockchain technology in which they reside, are a great combo for more institutional financial products like lending, exchanges/trading, etc. (more project types on Maker DAO)
The how of executing with DeFi is of course a bit more complicated.
Amidst the excitement for DeFi at ETH Denver, there was also a palpable tone of beware! and history repeats itself! This fear speaks from experience: By stacking the DeFi toolset high above the security of the blockchain, we could be creating more insecurity in applications and arbitrage opportunities that no DeFi business would expect or are likely to welcome. As the blockchain space is coining, we may be stacking the “legos” too quickly. After all, code isn’t always perfect …it’s written by humans.
More DeFi excitement from blockchain’s wonderboy and successful projects
Vitalik Buterin also had high praises for DeFi applications at ETH Denver — running on the new Proof-of-Stake (PoS) Ethereum 2.0 of course!
“The idea that just anyone, anywhere in the world, can have access to a system that lets them pay each other, and choose their own financial exposure, is a really powerful thing. — It’s something that a lot of people don’t have access to.”
“I think the DeFi applications that see the most use are the simplest ones…stable coins, synthetic assets, decentralized exchanges.”
Watching demos on a variety of these tools, including the Maker DAO’s Oasis App (which, might I add, has been successfully managing cryptocurrency market volatility and loan collateralization for well over a year — very impressive), I noted a significant gap to access these neo-financial tools. The subject matter expertise and user experience can still be extremely complicated, even for the astute cryptocurrency trader. That said, wider adoption is not necessarily the focus of DeFi products just yet. The stack is extremely young, in need of high volume testing and more years in use.
If you’re a “question everything” mind like myself, you wonder why banks don’t offer us rewards when our money is successfully loaned and why red tape/exclusivity has kept much of the world out of wealth-generating opportunities. You should be interested in DeFi. I know I am.
Here are a few takeaways I had from ETH Denver 2020 and the state of DeFi:
- DeFi may be a more qualified use case for blockchains and for cryptocurrencies than we have seen to date
- DeFi is growing fast, by some opinions too fast, and even insecurely
- DeFi still relies on some trust — it’s an application, built by a human
- DeFi will probably make the rich richer before distributing wealth :/
- DeFi platforms should help ease the volatility of cryptocurrency markets as more and more people gain access them
All in all, ETH Denver 2020 was another amazing event that showcased the opportunities for DeFi wonderfully. Thanks for reading and please comment with any questions or thoughtful additions!