‘Exit, Voice, and Loyalty.’ The economist Albert Hirschman wrote this masterpiece in 1970 and provided us with a choice framework when faced with declining institutions.
By extracting data from billions of users, Web 2.0 companies developed a business model of selling ads, or charging fees against people’s attention and engagement, which is increasingly going from a positive-sum game to a zero-sum game. We have seen more than once the user privacy violations by large companies and have repeatedly felt that tech giants have abused their monopoly position to manipulate rules and stifle innovation.
It’s time to exit.
Web 3.0 is coming
The progress of Web 2.0 to Web 3.0 and its development since the 2010’s has continued its rollout on a global scale. We have evolved exponentially to the point where we are solving problems of transparency and equality by upgrading the digital networks of globalisation to a new decentralised standard.
Short for decentralised finance, DeFi, is the face of these digital networks. The global networks of blockchains are built off tokens, some consisting of DeFi legos, which allow us to connect with each other in a meaningful way and squeeze in credible transparency into finance.
Over the last two short years, DeFi rose from nothing to hitting an all time high of USD 256 billion in Total Value Locked in Dec 2021. It means that people have had over USD 200 bln of their money saved or locked somewhere in the hopes of generating yields (think savings accounts or fixed deposits at your usual bank). Despite the recent market downturn, adoption continued as the number of DeFi wallets grew to 4.4 million unique addresses in April 2022, which has grown ~6x year-to-date and will soon approach the scale of leading banks if this rate of growth can continue. With over 1.7 billion in the world unbanked, the potential is huge.
But DeFi is more than just a better savings account for your money. It is a new way of freeing your money, a new way of finance, a world where decentralised finance now exists alongside its centralised siblings.
Programmable blockchain
DeFi exists on the basis of programmable blockchains. The original programmable blockchain, think of it like an operating system, has more than thousands of decentralised apps (dApps) built on top of it, with over billions of dollars of Total Value Locked.
Programmability and decentralisation allow DeFi and other applications to be built that have more collective ownership, less reliance on one single point of failure, and more autonomous control over itself as an organisation.
With Ethereum still taking up ~60% of the DeFi TVL, other smart contract platforms are on the rise and today we have BNB Chain, Avalanche and Solana with its own version of a programmable blockchain, and an ecosystem of dApps.
Finance has been the first use case of decentralised blockchains. DeFi use cases range from the basics of lending and borrowing, to asset and wealth management, structured products, automated market movers or trading options and derivatives etc. similarly to traditional banking but through its own unique edge of decentralisation.
And it goes beyond finance. Focused on peer-to-peer networks and smart contracts, the vast potential of programmable blockchain is unlocked: from humanitarian needs where the benefits to distributed ledger technology is being explored, to a wide interest in play-to-earn games, as well as the prospect of a decentralised metaverse. It is possible that we provide advanced and sophisticated DeFi Infra to all the different types of projects such as metaverse, GameFi, SocialFi, Web3, and NFTs and put them under one umbrella.
Without the heavy burden of regulations or excess luggage that other financial products carry, the innovative case of DeFi means it is only limited by the imagination and creativity of the people writing the smart contracts that govern how any specific product functions. As a decentralised alternative to traditional finance and other centralised services, DeFi has intense potential as both a disruptor and innovator of trends.
DeFi popular trends now
DeFi today continues to innovate. Today we see blockchain native thinking of what DeFi can really mean. We’ve gone from pure exporting of traditional finance into the DeFi, but towards designing new building blocks of DeFi from scratch.
This takes thinking of what DeFi can really mean from first principles. A recent innovation and reaction to the ‘Cambrian Explosion of DeFi Legos’ in 2021 has seen the rise of DeFi 2.0.
As Binance Academy noted, DeFi 2.0 is a movement of projects improving on the problems of DeFi 1.0. DeFi aims to bring finance to the masses but has struggled with scalability, security, centralisation, liquidity, and accessibility to information. DeFi 2.0 wants to combat these and make the experience more user-friendly. If successful, DeFi 2.0 can help reduce the risk and complications that discourage crypto users from using it.
These new building blocks of DeFi include using yield farm LP tokens as collateral, smart contract insurance, self-repaying loans, and so on. Governed by DAOs, DeFi 2.0 offers users the maximum use of liquidity and incentivises participants to create a sustainable and interconnected decentralised financial architecture and best capital efficiency.
Abundance
Now at mass scale, we are seeing the ability of new products and business models to be put together from others’ work like building Lego masterpieces. Therefore, a notion of ‘abundance’ floats with the innovation of open-source tooling and the encouragement of open collaboration on creative blockchain projects.
In the Web 2.0 world, open source already had a huge movement. Open-source projects are heavily used in developing software solutions. Leading open-source platforms like Github have seen a large number of developers and contributors.
In the Web 3.0, open source is taken to another level of what it means to truly share and have the whole world build on top of what you have built, and to see someone build on top of what you have built.
This is abundance on another level. The in-built abundances not only reduce the chance of single point failure, but also allows for product and process evolution, with experimentation at the local level which can scale if successful. By building in an open and decentralised way, we’re able to nurture a developer community and shape the ethos of Web 3.0: the sum is greater than its parts, and a community can build more value together than it could alone.
About Gwendolyn Regina
Gwendolyn Regina heads BNB Chain (previously Binance Smart Chain) USD 1 bln fund. Launched in 2021, the BNB Chain fund aims to bring 1 billion crypto users onboard, boosting the adoption of BNB Chain and the wider blockchain industry. Her main responsibilities include streamlining processes around deal sourcing, investment strategy, portfolio management and growth. As a part of her role, she invests in promising projects in the Web3 and MetaFi space (GameFi, SocialFi, NFTs etc.). Gwen has been speaking internationally for the past decade across Asia, Europe, and the US. She regularly gives keynotes, moderates panels, and speaks at forums about the future of Web 3.0, media and tech, including at global events and podcasts like Unchained, SXSW, ad:tech, Seedstars, Startup Turkey, Channel News Asia, and more.
About BNB Chain
BNB Chain is a community-driven, decentralised and censorship-resistant blockchain, powered by BNB. It consists of BNB Beacon Chain and BNB Smart Chain (BSC), which is EVM compatible and facilitates a multi-chain ecosystem. Through the concept of MetaFI, BNB Chain aims to build the infrastructure to power the world’s parallel virtual ecosystem.