1) Some thoughts on DeFi - A Thread:

The next big crypto bull market will truly kick-off when retail realises the possibility to make a relatively safe 5%-10% APY on savings denominated in Stablecoins such as $USDT, or in $BTC.

2) This will happen when mass-market providers such as @coinbase start offering access to DeFi savings rate through products like Earn.

There is a huge market appetite for something that until ~12-15 years ago was very common:

3) A relatively risk-free, relatively stable return on savings. If the current (heavily government manipulated) market savings interest rate is well below 1%, a huge market gap opens up. As Central Banks (unsuccessfully) try to drive the economy towards more risk...

4) ... regular people find themselves a) unable to make the right investment decisions because they aren't professionals, b) unable to access compounding returns, a key wealth builder across all times. Nothing catches the attention of my non-crypto friends as much...

5) ...as the high savings interest rates that relatively 'ordinary' crypto assets can yield.

This opens up two follow-up questions: 1) Are these high crypto interest rates sustainable? and 2) What happens next?

Let's start with 1)

6) Are these rates sustainable? We probably all agree that long-term rates over say 50-100% are not going to be sustainable, although they might still work for a while as products build up liquidity and try to attract it from users ('yield farming'). But 5-10%? Absolutely.

7) That's because your 5% savings interest rate is someone else's 60% highly-leveraged, high risk/return trade. And that's perfectly legitimate: Funds, whales, pros taking ultra-high risks on smart contracts, untested products, volatile prices are rewarded with high returns

8) But the retail saver will be extremely happy with her 5%. This creates a positive-sum game that will help build an entire industry from ground up in a way that is still unimaginable.

How will this happen? US Exchanges like @coinbase IPOing, will add massive legitimacy...

9) @coinbase, @Gemini, etc will very quickly become banks. @CelsiusNetwork will continue to grow. Probably #neobanks like @RevolutApp will join the party and start offering easy access to DeFi interest rates. CeFi front-end, DeFi backend - as @QwQiao wrote the other day...

10) Now here's where it gets interesting: Massive amount of liquidity will be drained from traditional banks and go to these 'new' banks. The 'old' banks will be too bureaucratic to enter the DeFi game anytime soon. There will be plenty screaming for regulation

11) Most of that will be focused on the many scam products that will offer 100%+ APYs (just like now...) and some of it will focus on KYC/AML issues. But never understimate the American desire for making money and accepting technological change

12) Regulators will not be keen to kill products that allow 'mainstreet' to catch up at the disadvantage of 'big banks'. Plenty potential for young, fresh politicians like @AOC to embrace innovation that benefits regular people. Also, don't underestimate tech lobbyists

13) There will be plenty money in play and keep in mind that most of these savings offers will focus around USD-pegged products like Stablecoins. US politicians will see it as a way to sustain $USD dominance in a global market

14) Now the part where this gets truly exciting is when you start considering the actual 'ingredients' of DeFi: Lego Blocks for financial products. Not just 10x but 100x better than what we have today.

15) I remember seeing a slide by I believe it was @robmoff from @balderton about how today's #fintech is only disrupting a tiny proportion of Bank's business. All the 'retail disruption' wasn't touching any of the Investment Banking and Markets business. This will all change.

16) DeFi consists of many many building blocks that are permissionless and fully composable. Anyone can try to stick different blocks together and see what happens, create new products and run experiments. It's all fully transparent on chain for everyone to check and to see.

17) This includes any imaginable financial product that exists today, starting from Lending products ( @compoundfinance, @AaveAave) to synthetic assets ( @synthetix_io) to Asset Management ( @iearnfinance) and insurance products ( @NexusMutual). And SO much more beyond anyone's

18) imagination - it will become possible through trial & error experimentation that is heavily constrained in today's siloed, heavily regulated and quasi-monopolistic financial system. Entirely new products will emerge.

The 'end-game' will be B2B and Enterprise.

19) Companies that operate internationally pay huge amounts to their banks for options, to protect themselves against currency risk and so on. Then banks package these products and sell them on. I worked in banking - it's basically the number 1 revenue source.

20) If you are a big company, you will pay huge premiums, if you are small, you will struggle to access it, if you are in a developing country, well, good luck to you. The system is heavily skewed and a total mess for most participants minus the banks with access to USD funding.

21) Now imagine @coinbase, @CelsiusNetwork etc, more or less well-known brands, more or less 'trustable' (by the mainstream) companies starting to sell insurance products and other derivatives products to help anyone hedge their risks. At an absolute fraction of the current cost.

22) It'll be an absolute economic game-changer on a global scale - enabled by a new financial system that is much more inclusive, transparent and with the potential to be more fair.

Fun times ahead.

What can go wrong? Plenty. But many of these developments are unstoppable.

23) I wrote this Thread for sharing with my friends who are less familiar with Defi and its potential.

It's heavily inspired by writings & podcasts from @LexSokolin, @AndreCronjeTech, @naval ( https://twitter.com/naval/status/877467629308395521), @Mashinsky and many others.

Feedback welcome