DeFi, CeFi, and disruptability

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Noah Seidman
Jul 11, 2020

The common component of DeFi & CeFi is Fi, obviously. Finance encompasses different products. Value transmission, value storage, lending, and borrowing are common products. Historically banks provided these types of product, but more recently private enterprise stepped in. Check cashing, payday lenders have all stepped in to capitalize on the most neediest of borrowers and underbanked. If small business can step into banking territory, it's time for individuals to directly step in to achieve better opportunities. All that's needed is the software and technology that allow individuals to bypass what was historically only available to CeFi companies.


This is where the mid to long term potential for DeFi fits into the macro picture of finance. Underbanked individuals need products that facilitate historically bank offered products. The ability to store value, and transmit it as required. For fiat gateways such as Sequoir, Gemini, Coinbase eventually they will have a national fintech banking charter, and direct deposits will be a functional possibility. This will allows for employment payments to be stored in fungible crypto assets for purposes of retaining value, and no doubt transmitting it. More importantly, superior to traditional banking products, these impending DeFi products will produce yield far superior to what banks can possible offer.


Banks are for profit centralized companies. Banks lend almost all deposits for purposes of generating yield. A small portion of the yield is directed to depositor accounts. Nowadays banks are required to hold 0% of depositor accounts, and are allowed to lend 100%. There is nothing fair about the products that banks offering, and all data points to a confluence emerging that centralizing banking is poised for disruption.


DeFi allows individuals depositors to lend their stored value generating a meaningful amount of yield far superior to what banks can offer. Individuals can now lend value directly to interested borrowers, all while controlling their value at all times. The borrowing is also much more secure because most debt is over collateralized. Without getting too detailed about why and how the lending process of common DeFi apps is far superior to traditional CeFi products, suffice it to say DeFi lending gives individuals power that banks historically hoarded.


There's a couple of factors to establish disruption inevitability. First, the technology needs to work. Second, the technology needs to be profitable. Third, the target market for disruption must be evaluated for susceptibility. It appears that these three factors clearly point to traditional banking inevitably to be disrupted by DeFi lending and borrowing products. It works, it's profitable, and traditional banking is inferior and simply cannot compete.

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Noah Seidman
Jul 11, 2020

Thanks for reading!

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