DeFi’s future will be extremely sticky for users

If DeFi succeeds, its future will be invisible, automatic and essential for every business.

DeFi's future will be extremely sticky for users

As we now look back at the growth of the cloud computing industry, it was the arrival of cloud storage in 2006 that marked the transition from interesting new technology to a significant, high-growth industry. The tipping point was the birth of a simple, scalable, and very useful service that could be easily plugged into existing tech startups.

The world of blockchain will be no exception. Every industry must have such a tipping point, where the product goes from novelty to true usefulness, which will trigger a shift from experimental to mass adoption. When we look back at the events that separated the early days of blockchain experimentation into the era of rapid adoption, that will be the arrival of DeFi.

DeFi is similar to cloud storage in that it offers two things we didn’t have before in the blockchain world: useful smart contracts and interoperability. Note the emphasis on usefulness here, as token standards and smart contracts were previously available, but it wasn’t until they were applied to DeFi that we could see a real-world example of their value proposition. Just as cloud storage can instantly provide startups with unlimited storage capacity by embedding existing applications, DeFi does the same thing in the financial business. Want to buy and sell in dollars? Stablecoin can be used anywhere. Want to build a lending business? You don’t need to build your own stablecoin because you can use any existing digital currency ERC-20 tokens, the standard for ethereum blockchain digital assets, all of which are theoretically interoperable. DeFi could prove to be particularly powerful because once people start using it, they find it hard to stop as it becomes increasingly integrated into their daily business and personal activities. This is driven by the nature of defining innovations that build on each other and how those innovations in turn generate further innovations. This process is happening right in front of us. the initial building blocks of DeFi were algorithmic and fiat-backed stablecoins such as MKR and USDC. since then, it has taken a step directly towards lending and deposit contracts. The first innovation based on these is revenue mining, where smart contracts actively find the best return for your assets.

With the integration of off-chain assets, DeFi’s world will become bigger and stickier. The European Investment Bank’s decision to issue digital notes on the ethereum blockchain is just the beginning. However, stickiness isn’t just about more assets or different types of assets and services, but integration into automated business processes. Individuals and businesses will begin to integrate their cash flow and assets into the DeFi ecosystem as a regular part of their personal and business financial processes. The most immediate example of what I hope to achieve is the integration of corporate purchasing processes into DeFi. Specifically, I want to have purchase orders, accounts receivable and product inventory pass-through and then integrated. The seller should be able to get working capital from the value of the purchase order and then also get an early payment on the accounts receivable once the product is shipped. At any given time, companies should be able to borrow against the value of their inventory to free up working capital.

To achieve this goal, there are several tricky issues that need to be addressed. The first and most important is that companies do not want to share with the public the identity of their suppliers or the prices they pay, so privacy is critical. At the same time, the credit reliability of the buyer and the reputation history of the seller are extremely important when pricing the credit offered. I believe zero-knowledge proofs have an important role here, such as proving long-term payment history without sharing buyer or seller identities. Assuming we can overcome these issues, I expect the injection of DeFi into the enterprise workflow to be not only rapid, but very sticky. If you can unlock working capital in an automated way, why do it only once? In fact, why not build workflows into your system and do this with every purchase order and invoice? Processes like these will make your company’s cash flow more reliable and automated.

Once these types of automated integrations are complete, they tend to stick around. Typically, enterprise software lasts between six and eight years, and the automated processes that are embedded in the software tend to stick with those systems. This is becoming increasingly true for individuals as well. I’ve been using since its inception in 2011. I rarely log in; it just works in the background, connecting my different systems with pre-programmed and programmed automated processes.

If DeFi succeeds, its future will be invisible, automated, and essential for every business.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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