 2019 was a year of DeFi, so in this video I'll be talking about it. I know a lot of you want me to make more blockchain videos. I'm not. There's more to life than blockchain. I love the space I've been in forever. However, I think it's way too early and everything's been covered and and I'll let other people cover it. However, DeFi has been fascinating 2019. Now before we begin, I do want to talk about the definition of DeFi because I think it's a fake definition. Because when they talk about DeFi, it's not really DeFi. Let's let's lay something out. We talk about Ethereum. Ethereum in this case is the underlying protocol and asset that supports as collateral security for the decentralized ecosystem. Now you look at Ethereum and you look at the nodes and you look at people who are operating the nodes. Today, for the most part, Infura runs the nodes. Now if Infura goes down, obviously, the security and the speed and everything in Ethereum slows down to a halt. So what is that? Is that decentralized? Is that a spectrum of decentralization? At the end of the day, it's all a spectrum. You look at, for example, the biggest player within the DeFi space is DAI, which is Maker. Is that decentralized? For example, Maker dictates the governance, dictates the interests, dictates how the operating system behaves. You and I can become players within the Maker ecosystem. Pay to play. I'll buy millions of dollars worth of Maker and do what I want. And Dragonfly Capital just the other day bought, what, 20 million dollars? Funny enough, about two weeks ago, someone wrote how 20 million dollars can take down DAI. So it's interesting. And so the whole word DeFi is false. They shouldn't use it. I'd rather use a word OpenFi or C-Fi. And it's interesting because I think you can see it now. For example, $666 million of ETH is locked in the underlining ecosystem. Now currently DeFi just caters to the rich, to be honest with you. The whole idea of helping the unbanked is bullshit because there's pretty much two primary things people are doing in DeFi. They're taking a loan or they're doing savings. There's derivatives for syntax, but they're slowly coming out. But the primary use case is loans and savings. Okay. For me to take a loan, whether it's a DAI loan, ETH loan, you can do Bitcoin loans now. Usual LTV is $150. So it's three to one ratio for an LTV. What does that mean? I want to take $100 loan of ETH. I got to put down 300 bucks of ETH. So right away, you're not catering to people that are in the unbanked. You're catering to people that have bags full of ETH or other tokens that they eventually convert to DAI, ETH or Bitcoin. Okay. But why are they doing this? Are they taking a high loan of like 10% just for shits and giggles? No, they're not. They realize that maybe they're going long on ETH or long on Bitcoin. So their 10% loan is the price to pay. So they're predicting or they're assuming ETH or Bitcoin will double in the next 12 months. Or they're arbitraging somewhere else. They're doing trading or they're doing bots. Who knows? At the end of the day, if they're beating their 10%, whatever, let's say 6 to 10% loan. If they're beating their 6 to 10% loan somewhere else, making 12%, 14%, they're profiting. Now, savings, same thing. You're giving out your crypto for whatever percentage. Now, let's say you're dealing with a protocol like Compound or like Uniswap or any of these other protocols. Not Uniswap. It's a little bit different. That's a dex, but like a Compound lending protocols. How do they make money? Well, it's arbitrage as well. You give them crypto, whether you're lending, whether you're borrowing, they take the crypto, they give it out for percentages, lending and borrowing. And so they do arbitrage on top of that. Okay. So let's say if you look for slippage and you look at total platform of something, maybe they're making, I don't know, like 4 to 5% per every dollar coming in because they're arbitraging. They're lending it out over here, they're giving short-term over there. Everyone's arbitraging over arbitraging over arbitraging. Now what happens when interest rates and systems like this become a commodity, which they are? Well, when you have more players enter the space and you have better streamlined technologies, well, the competition gets heavier and people start chipping away and commoditizing the value of a savings account. So you might be getting 6% a day. No, no, no. That's not going to last forever. That'll go down to 2%, 3%. You're lending out money at 10%. And that's not going to last more competition. It's going to be streamlined. So that type of interest rate will be commoditized. You can't be charging 10% for a loan. So that'll go down to 4% or 5%, maybe even cheaper. And so basically right now we're in the super early stages of just people that have a lot of crypto who are trying to arbitrage over everybody else. That's it in a nutshell, within the DeFi OpenFi space. However, this early technology has a lot of promising features in the future. I think it does. It helps to streamline accessibility for a lot of places that didn't have accessibility. The ease of use is better, at least for certain people. UI, UX needs improving. Obviously, counterparty risk is at play over here. So trusting these platforms, that's a lot of people who trust a CFI over DeFi or OpenFi. At least some of them are insured and backed. However, the whole idea of right now of it being a better option than some banks, it's a mistaken lease in North America. I can get a line of credit for at the prime rate right now, which beats any of these fucking DeFi rates. And it's insured by my bank. Why would I take a loan out for fucking 10%? It makes no sense. And I got to over fucking collateralize. It's insane. I think the magic within the open financial space will be once somebody figures uncollateralized loans. That's where the magic is. And there's groups trying to work on that. I think we're a long way from that. That's it, man. It's early. I think 2020 will be hyper-accelerating the space. You're going to see commoditization of savings and interest rates go down because that's the way they're going to do lead generation. No different than what Binance is doing with staking. So a lot of companies were charging for staking or exchanges were charging split percentage for staking. Binance comes in, it's free staking. You can get all the interest rates. Well, great. It's a free lead generation tool. Anything that's a commodity within this space will be commoditized almost zero. It's a zero sum game in this space or any financial space. It's all about AUM, assets under management, how you make money, whether a protocol or a company is like, you need to have hundreds of millions of dollars and maybe take like 0.2 or 0.5 percentage of the total assets going through your platform. That's how you make money. And so 2020 will be interesting. You have Cosmos and Polkadot coming in, more people creating open financial products. And it's still going to be catering to the people that have a lot of bags, a lot of Ether, Bitcoin, other tokens. It's not catering to people that have nothing because they can't take out loans yet. And so that's it, man. Simple as that. Keep an eye on it. And if you guys have any question, leave a comment below this video. Make sure to subscribe and I'll talk to you guys soon. Peace.