Our current financial system is an absolute miracle. We often take it for granted, but it's a modern marvel that hasn't existed for all too long. It does incredible things and creates opportunities for people across the globe. But it's also a big fucking mess. There are so many things wrong with it, and so much opportunity for improvement. Too many people are left out, it's controlled by slow institutions, there's little innovation (outside of fintech), and the banking system isn't even open 24/7. Money never sleeps. How is this excusable?

So I'm long DeFi. It's a system that's accessible by everyone, everywhere, all the time. That in and of itself is enormously powerful. However, in its current state the primary utility of DeFi is speculation. There's a preposterously large amount of money sloshing around the system speculating, searching for yield. But that's about it. I haven't seen a lot of utility beyond that. As Matt Levine said, "The crypto boom is a wild gold rush for money," and no place exemplifies that more than DeFi. But this will change over time.

Lending is one of the most obvious places for DeFi to move beyond speculation and to other utility. Right now, almost all lending that takes place is over-collateralized, which enables people to borrow primarily for the purposes of...further speculation. If you want to know more about OCL, Frank Rotman has a great thread about it. I'm really excited about DeFi lending moving from OCL to under-collateralized lending and had some ideas as to how this could work.

One company tackling this is Goldfinch. They are essentially a fund of funds, aggregating assets in DeFi from people searching for yield and deploying it into a series of offline/off-chain lenders like PayJoy. For digital asset holders they provide an avenue to get yield outside of being a degen and for analog world lenders they are a capital source. They are effectively acting as a bridge between the DeFi crypto wealth that has accumulated as of late and off-chain lenders.

This is a neat concept because more and more assets will be held in crypto over time, and if those assets can be deployed off-chain, they can achieve yield that's more consistent than speculating on token appreciation or investing in the next DeFi X.0 scheme. Imagine a fintech lender being able to tap into crypto wealth, or a DeFi participant being able to lend their crypto to Stripe, Shopify, Affirm or GS. Lenders sell capital, and there's no reason the capital they sell can't be the assets held in DeFi. It could, in theory, provide everyone across the globe access to every single asset class, and that changes the game.