Market disruption and defi

in LeoFinance20 days ago (edited)


Market disruption is a topic that is often talked about, aspired too and almost never recognized by the establishment before it is too late.

The most important reason for it is that market disruption usually doesn’t happen because of what the establishment does. Quite often it is caused by new technology used by players from outside the industry.

**The new entrant to the market is first ignored, then dismissed, then criticized or even attacked, but then it is usually already too late. **

the example of PayPal

Do you remember the time when transactions between banks took several days and even more when you sent some money abroad?

When webshops started to emerge on the Internet, payment was a big and slow hurdle. Until Elon musk, founder of PayPal decided to challenge the establishment and create a fast, user friendly, electric and relatively safe way to pay for goods on the internet.

Nowadays every self-respecting webshop has a PayPal integration, because customers love it.

The banks did not see this one coming and as a result they now miss out on a huge amount of transactions.

the example of Tesla

As you all know, Elon Musk then went on to challenge another big established industry. The automobile industry with his brand Tesla.

Tesla was first ignored, then dismissed as they would never succeed. Criticized for everything they do. To be honest, it seems some of those criticisms were legit.

Still, even Toyota that sold 1 million Prius hybrid’s before the other manufacturers were able to respond wasn’t able to see the opportunity for electric vehicles at the scale that Tesla is building them.

success factors

Especially in a very established market like the automobile industry you can’t compete the same way the established players do it. They have way more scale, so they will have better margins.

So what has Tesla done differently to help them do this and make Elon Musk the wealthiest man on earth?

First they came with a Silicon Valley mentality to this industry. Which means, growth is everything. Profits don’t matter, we just need to scale as fast as possible.

This was very risky as you can see in the documentary ‘revenge of the electric car’. At some point Elon Musk had to wire in his last 3 million from his personal savings to be able to pay the employees. After that a significant loan from Daimler was needed to help Tesla to not go bankrupt.

Second, they went all in on the new technology. Not just make a car that has a different drive-train, but make sure that you combine all possible advantages you can get.

There aren’t enough batteries? Then we build our own battery factories.

Copper is expensive? Then we do everything from a giant touch-screen in order that we need only one cable, instead of a cable for every little button.

The info-tainment system in other cars gets old really quickly and is hardly ever updated? We use over-the-air updates to keep improving the user experience, the performance and the range of the cars.

Charging an electric car is a hassle? Let’s roll-out a world wide network of fast-chargers to make sure that charging a Tesla is the most convenient way to charge an electric car.

We don’t make a profit? Just sell the co2 emissions rights and sell some more Tesla shares on the stock market.

This means that Tesla does far more than the other car manufacturers. Not just a car, but superior software, a charging network, the batteries needed for the car, a battery and even solar panels for your house. Just to make the transition to an electric car easier for their customers.

What about decentralized finance?

Decentralized finance is still a very small fraction of the global financial market. Even in crypto a lot of trading happens through centralized parties.

That makes it all the more special that a centralized exchange like Binance, that has a staggering amount of trading volume, starts their own somewhat defi solution. The binance smart chain where leofinance launched cubdefi recently.

If big players like binance do this, it is a clear sign that defi is here to stay. Even though currently it is still in the ignore or dismiss phase.

This will change though and the question is if big financial institutions will be able to adjust to this new reality.

What will the world look like when people start to move their savings to crypto and when they want to spend, take out a decentralized loan on their crypto assets, in order to not have to sell their crypto.

Now banks won’t care so much when you don’t put your savings in a bank account with them. They can make money out of thin air. What they do care about is the fact that you don’t take a loan with them. As that is where make the real money.

I think one of the hardest types of loans for defi will be mortgages as it is really hard to get that much money without collateral.

I suppose the best way to do it is either tokenize the mortgage or the home. You would need a pretty advanced smart contract , but I feel if this were possible, then that would a major step to move away from the centralized banking system.

I have heard that AAVE is working on this with RealT, but they still have a way to go. However if they pull it off, then that will be a major market disruption.

I’m curious to hear what you think. Do you know of any other projects that are working on this? Would you like to buy a tokenized house?

Thanks for reading!


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