As we print more and more dollars, the purchasing power of those dollars will continue to fall. You know this as inflation. Currently, a Bank of America savings accounts pays out about 0.01% interest per year. We are effectively losing money by parking money here, but banks need those deposits in order to have the liquidity to lend out money to people who can prove they have already enough money to not actually need the loan (see above). The moment enough real estate developers begin to hold funds / working capital / profits in crypto instead of a bank, the industry will hit a tipping point
With no intermediaries and new incentives to provide liquidity to the crypto world right now, we can do oh-so-much better than our Wells Fargo Premium High Yield First Choice Savings account. Deposit those same dollars in a stablecoin - a DeFi token like $USDC or $DAI that is pegged 1:1 to the U.S. dollar - and you can earn between 8-35% per year on those coins. Check out Blockfi
, Waves Exchange
, or Multis
(for a business account). There are plenty of arbitrage and earning opportunities with the current market dynamic, but at the simplest level it makes sense to earn meaningful interest on funds not in use rather than allowing them to slowly turn to dust in your First Advantage Plus Platinum Savings account at BB&T.
As of now, most crypto loans are utilized by traders wanting to use their crypto holdings as collateral to likely go buy more crypto. But it is rapidly expanding, and there will be many new lending and borrowing opportunities in the near future. Any entity or individual with assets will have the ability to become a “bank,” and anyone with an internet connection can be a borrower. The smart contract takes the place of the underwriter, attorneys, compliance, and collections. Game on. (A bunch of these are in the early stages but look promising: Centrifuge
Now imagine you can use other forms of collateral for these loans, rather than just crypto holdings. You can get a construction loan, factor your invoices, or refinance your home completely on the blockchain with or without a traditional bank. But we’ll need some kind of bridge that connects the physical (off-chain) world to the crypto world (on-chain). Enter NFT’s.
As Naval points out
, “Public blockchains will be the title registries for everything of value. Ultimately, NFTs will authenticate the world
.” Our current system to prove ownership of real estate is a low-tech public registry. We already don’t trust it very much, which is why you have to have a lawyer or a title company do a title search as part of the process when you buy a property. They are middlemen who are authenticating ownership.
Municipalities could use NFT’s as deeds to property, providing a record of ownership and transactions that is public and can not be altered. With legitimate proof of ownership on-chain, that property can then easily be used as collateral for loans, fractionalized for multiple owners, and likely hundreds of other things we haven’t even imagined yet!
: A fun one to think about is the use of NFT’s to authenticate skills and certifications. Your digital wallet will not only keep your currency, it will be your resumé, your portfolio of expertise, and your body of work. The impact this would have on education and hiring would be profound. (via Balaji
Money will flow based on the smart contracts we enter. Our employment contracts will be smart contracts and we’ll be able to get paid continuously, in real-time, for the work we do (Bitwage
). Tenants will pay rent the same way. Investors will automatically receive distributions based on the terms of their investment. The same for lenders, vendors, brokers, and insurance.