11:FS's Pierre Legrand guest hosts the Money Movement Podcast DeFi's Institution Moment
This podcast was hosted by 3 people. Jeremy Allaire, Johann Bornman and Pierre Legrand. Jeremy Allaire is the co-founder, Chairman, and CEO of the circle. Johann Bornman is the institutional product lead, the consensus at MetaMask, and Pierre Legrand is the guest host.
This podcast is originally 1 hour long and discusses some important key points as explained by the experts. These important key points are:
1. How Widespread is DeFi adoption?
2. What are the barriers to entering DeFi?
3. Which DeFi products offer the most attractive opportunities for institutions?
4. How can adding KYC facilitate greater institutional involvement?
DeFi is a kind of banking system that provides peer-to-peer transactions without any brokerages involved with complete transparency. Nowadays people are adopting and liking DeFi very much so this podcast was held to discuss DeFi and its related points in detail.
How widespread is DeFi?
India has a 1.4 billion population and is one of the top 10 countries that are adapting DeFi real fast. It is listed on the 6th number in the list of top 10 and other 5 countries include United States of America, Vietnam, Thailand, China, and the United Kingdom. DeFi was built primarily on top of the Ethereum network just like non-fungible tokens nowadays being traded-in terms of Ethereum. DeFi provides peer-to-peer transactions and you can get all the financial products available on DeFi with peer-to-peer including financial products such as cryptocurrencies, stock exchange, etc.
Mass adaptation of DeFi is happening in India and this adaptation is among crypto investors. It means that people who are interested in making crypto investments play an important role in the development of the economy. It has made India the strongest in high-income countries.
What are the barriers to entering DeFi?
The next key point discussed in the podcast is what barriers are there to enter or adapt the DeFi network? DeFi provides peer-to-peer transactions it means that the person does not have to pay for the commission but it also has a down point. Many people are avoiding DeFi because its network requires trading on a liquidity pool. Trading on liquidity pools means that the person has to pay a high fee. That's why some people are still preferring the CeFi network system.
Also, the incurring fee of transferring ERC 20 tokens are much higher through DeFi than other financial systems. There are also other errors or downfalls to this DeFi system which is why there is a scarcity of on and off-ramps and it means that the users are not getting fiat into the problematic system. But the good news here is that the companies are working on this issue. They may soon be able to solve this.
Which DeFi product offers the most attractive opportunities for institutions?
The next key point discussed in the podcast was related to the opportunities that DeFi is offering for institutions. Well, the most advantageous part is that it provides peer-to-peer transactions it means that the person can have full control of his funds. Also, the users can borrow funds while putting up their crypto assets as collateral which is good for many institutions. Users can lend crypto for interest rate and this interest rate is higher than traditional finance. It means that if you are investing in crypto then this feature is great for you to earn more interest on it.
How can adding KYC facilitate greater institutional involvement?
DeFi doesn't verify its users' IDs or addresses. So, people think that is risky to do peer-to-peer transactions with DeFi because they can't track other person's IDs. So, with KYC this problem has been solved. KYC stands for ‘know your customer’. It will verify the identity of the customer. It helps the lender by performing risk assessments. It does so by identifying the previous financial history and assets owned.
With DeFi people can easily hide their IDs and there are higher risks of fraud but with KYC you can know your customer and it lowers down the risk of fraud because customers can't hide their identity anymore.
Besides this, KYC has also lowered down the risk of money laundering and anti-social activities. So, if a person tends to use DeFi for its peer-to-peer transaction then he should use KYC with it to be safe from any kind of fraud and mafia.