DeFi Defies The Critics With A Growing Number Of Real-World Use Cases
For all the attention decentralized finance, or DeFi, has been getting in the crypto industry, the vast majority of the world still sees it as a fringe financial technology. It’s a complex world of concepts and terms such as yield farming and staking, over-collateralization and liquidity pools, that very few people understand.
New users could be forgiven for thinking that DeFi is a limited industry with very little practical benefits besides trading and earning crypto. The consensus being that it’s nothing more than a place to “play” the cryptocurrency game, with no real connection to our real lives. Even if your portfolio gains 2,000% in a matter of hours, what can you actually do with those tokens?
What many fail to realize is that DeFi use cases are growing by the day. Like the crypto industry in general, DeFi is evolving fast. These days, it’s not only able to solve many of the challenges of traditional finance, but also, have a real impact on our day-to-day lives too.
Crypto Credit With Real-World Assets
Take Centrifuge for instance, a DeFi financing protocol that is throwing a lifeline to small and medium businesses all over the world by making it possible for them to tokenize real-world assets they hold in order to obtain a line of credit that few banks would ever be willing to entertain.
The goal of Centrifuge is to make DeFi more relevant to those that don’t already hold crypto assets. Using its platform, a business can transform assets such as car loans, trade invoices or music streaming royalties - essentially any legal document that entitles them to cash - into securities. Centrifuge will then issue interest-bearing ERC20 tokens called DROP against those securities, which can be used to access DeFi services such as lending and borrowing.
Centrifuge’s partners include the trade finance startup ConsulFreight, which has used its Tinlake marketplace to tokenize freight shipping invoices. Another company, called Paperchain, is helping clients access music streaming royalties early by tokenizing those future earnings. Investors who’re willing to provide liquidity for these asset pools can then take their DROP tokens and obtain stablecoin loans on other DeFi platforms such as MakerDAO. In other words, those businesses are tokenizing freight shipping invoices and music streaming royalties in order to use them as collateral to obtain cash loans.
DeFi For Food Deliveries
DeFi is changing the game in the fast food industry too. The Bistroo app is primarily a peer-to-peer marketplace for consumers to order food and drinks directly from restaurants, aiming to take on centralized apps such as Uber Eats.
The key difference between Bistroo and other apps is that it’s an entirely neutral platform, meaning restaurant owners have full control over their digital presence, the ability to price items as they wish and change their menus and prices at any time. Restaurants also have full access to the data their online sales generate.
Transaction fees are low, with Bistroo charging just 5% on each sale versus the 15% that most other platforms take. Restaurants also receive their payments instantly thanks to the platform’s use of smart contracts, as opposed to waiting weeks to receive their income.
Key to Bistroo’s platform is the BIST token, which not only handles payments but also provides restaurants with access to backend services at cheaper rates, such as discounts on advertising, featured spots, analytics services and more. BIST also provides the DeFi connection, allowing restaurants to access community financing against their future cash flow. Doing so is simple - the restaurant owner creates a BIST Token Advance request, then app users can take a look at the company’s on-chain finances and performance to decide if they want to provide it with funds, in return for a share of its future profits. The terms of the agreement are coded as smart contracts, which guarantees lenders an agreed percentage of the merchant’s future sales until the initial capital and accrued interest is repaid.
Quick & Easy Investments
One of the main attractions of DeFi is its high earnings potential but the vast majority of crypto users are not professional investors and have little idea of concepts such as yield farming and liquidity provision. These people therefore tend to avoid the opportunities in DeFi as they don’t fully understand it.
It’s this market that HyperDEX is gunning for. HyperDEX aims to make it easy for anyone to invest in DeFi by presenting them with a simpler choice of three investment products - called Cubes - with low, medium and high risk. So there’s no need for an in-depth understanding of how all kinds of different protocols work. Instead, users can choose from a Fixed Income HyperCube that provides a fixed return over a set period of time; an Algo Trading Cube that delivers a variable return over a set period; or a Race Trading Cube that enables investors to speculate on the price of a specific crypto asset over a set period of time - delivering potentially far greater returns but with higher risk of everything going pear-shaped.
Users can maximize their returns on all three types of cube by purchasing the platform’s native HYP tokens and using them to create a corresponding “HyperCube”. In that case, a Fixed Income HyperCube would deliver the initial return on investment, plus an extra 20% return on the deposited HYP tokens, while the Algo Trading HyperCube and Race Trading HyperCube would both deliver an additional return in HYP tokens equivalent to their original return.
The idea is that investors can create HyperCubes to earn parallel profits in HYP tokens. While the standard cube will pay a basic percentage reward on the underlying asset, HyperCubes will pay out double, while also increasing the basic percentage reward at the same time.
Betting On Real World Outcomes
While there might be some stigma around the predictions market, there’s no denying that it’s also a very popular use case that can attract many new users to DeFi.
The Augur platform is one such example that’s already getting lots of attention. A DeFI prediction market built on Ethereum, it makes it possible for ETH holders to create and take part in prediction markets, betting on the outcome of almost any kind of event, be it sports fixtures, general elections or something else. It’s an alternative to centralized bookmakers that often have heavy restrictions based on jurisdiction and generally only accept fiat currencies.
So, a user can use Augur to place a bet on the 2022 UEFA Champions League winner by bidding for “shares” on their desired outcome - picking the team they believe will win.
What’s unique about Augur is it doesn’t require a centralized decision maker to verify event outcomes. Instead, users can purchase Augur Reputation tokens (REP) and stake these on the “truthful” outcome. The outcome with the most stakes is then considered to be the correct one, for the purpose of settling bets and paying out winnings. Should a REP token holder stake their tokens on the wrong outcome, they would forfeit those tokens, meaning there’s a big disincentive not to try and game the system. In return for their participation, REP holders receive a portion of the platform fees.
Conclusion
As the above use cases demonstrate, the world of DeFi has evolved above and beyond its confusing concepts. It’s rapidly becoming an extremely useful instrument that can impact on many facets of our lives, providing businesses and individuals alike with access to an alternative financial system. Not only that, its benefits are not only on a par with those of traditional banks and fiat currency, but in many cases, actually exceed them.
For sure there’s still a big learning curve for those who’re new to the world of cryptocurrency, but as additional real-life use cases penetrate into DeFi and the benefits over legacy systems become more apparent, much wider adoption is only a matter of time.
***
DISCLAIMER
The views, opinions and positions expressed in this article are those of the author alone and do not necessarily represent those of https://www.cryptowisser.com/ or any company or individual affiliated with https://www.cryptowisser.com/. We do not guarantee the accuracy, completeness or validity of any statements made within this article. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author. Any liability with regards to infringement of intellectual property rights also remains with them.