[Question by David] "Defi's goal has been to bank the
unbanked. So far it has been mostly used
by geeks. Whendo you think defi  will penetrate the truly
unbanked?" [Answer] I'm not sure if he truly
unbanked want to be penetrated, David, [smiling] but
we'll take that question at face value.
Alright, so if DeFi's goal is to bank
the unbanked, you know I think that maybe
the stated goal, but more broadly it's about
making broader availability of financial
services. And the way DeFi achieves that
is by removing intermediaries and
gatekeepers that traditionally have
been barriers to economic inclusion. So
this is how to think about it
conceptually. And the same thing applies
both to DeFi as well as the broader
space of cryptocurrencies, including of
course Bitcoin, which is that one of the
main reasons people are excluded from
having access to financial services is
because organizations that have complex
complex relationships of counterparty
risk with lots of intermediaries tend to
be very risk-averse. And because a lot of
that risk has to do with human
decisions about how plugged in you are
to the economic system, it's a lot
easier to just exclude large
numbers of people based on relatively
arbitrary criteria. This is the world
we live in. Where billions of people have
very limited access to financial
services because it doesn't serve the
interests of the banks, the investment
banks, the financial services
organizations to include these people.
And so the whole purpose of
cryptocurrency is to extend
financial services to those who don't
have it, by removing those who get in the
way by demanding identity, credit,
documentation, and all of these things
that
can be enormous in insurmountable
barriers not just for people who live
you know in deep in the Amazonian Basin
or in sub-saharan Africa or places like
that but also even in places like the
United States. People who are not part of
the mainstream. That includes for example,
undocumented immigrants, includes the
homeless you know try opening a bank
account when you don't have a permanent
address and see how well that goes. You
know all of these are really difficult
problems to solve and one of the easiest
solutions is to simply not require any
proof of identity and to extend
financial services. This is aspirational.
Now let's talk about the reality. In
reality, DeFi is not banking the
unbanked at the moment except perhaps in
a few very narrow cases with a few of
the more simpler aspects of defi. For
example, stable coins that are pegged to
a national currency that is broadly
recognized and used as a unit of account,
like the US dollar, such as DAI from
MakerDAO which is a decentralized
stable coin and one of the foundational
blocks of defi has some very interesting
applications for the unbanked because it
allows them to get into cryptocurrencies
in a way that doesn't expose them to
wild volatility of markets vis-a-vie
their national currency. So from that
perspective it may make things a bit
easier in the current environment where
cryptocurrencies are still quite
volatile because of their limited
liquidity. So that's an example where it
might work but beyond that let's be
honest. At the moment DeFi requires a
lot of understanding, the technology is
still immature and prone to problems,
risks, and bugs, security bugs, and
potential catastrophic security bugs, and
user interfaces for using defi are not
yet mature. And this is something that
applies to all of crypto in general. So I
think the difference between the vision
and the reality may be as much as a
decade of polishing and maturing the
interfaces, broadening access, increasing
liquidity, reducing volatility, maturing
the underlying security of the smart
contracts, and building more and more
robust infrastructure so that it can be
more broadly applied. That's okay, that
doesn't mean the vision is unachievable.
It simply means we have to be more
patient with what is a very new and very
radical departure from business as usual.
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