How is DeFi unlocking value? | NFTs, Lending, Expertise
DeFi - April 6, 2021
DeFi is reimaging the financial system. This means that the purpose of DeFi is to unlock value. How is this achieved? In this video, we answer this question by going back to the fundamentals of DeFi.
The purpose of the bank is to make money efficient. This is done by making the best use of idle money. Money deposited in a bank account is idle money. It is made efficient by putting it to use. This can be done by giving out loans. The difference between the interest paid to the lender and the interest received from the borrower is the bank’s spread.
This is similar to investing at a primary level. Taking idle money and putting it in an early-stage company like venture capital and private equity funds do is a form of unlocking value. But this value is evolving beyond finance.
NFTs, Credit and more DeFi value
With the growth of the internet, gig, and spare economy, all sorts of value are unlocked. Take nonfungible tokens or NFTs. An NFT allows the creator, whether they are an artist, a musician, or an athlete to unlock value that wasn’t possible before. This value is shared with their fans, which could not happen with a song, an artwork or a highlights reel before. This is now possible because of DeFi.
Take the credit market. DeFi is also unlocking idle money in the form of cryptocurrency for entrepreneurs and startups across the world. And this is done through digital currencies and the blockchain. No middleman or government is involved in this trustless system.
This is how DeFi is unlocking value. What the internet allowed with time, DeFi is allowing with finance.
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