Today, an article was released where a co-founder of the company Framework Ventures and former CEO of FTX Global Capital announced that DeFi gives him hope following the collapse of his former company.
I primarily have a background in alternative lending for small business, but I have always been passionate about alternative finance. When FTX Global collapsed, I had been advocating for DeFi as an upcoming way to offer financing to both SMBs and consumers. I realized that in many ways it is truly democratizing investing by providing opportunities to anyone with any amount of money who has the drive and ambition to take advantage – it also diversifies risk away from just traditional 1st world investors which can be argued is necessary in today’s era of volatility. I honestly believe that the next big shift in investing will come from those in the financial system who are more like consumers rather than the 1st world investors which can be overly conservative. As a result, I began to deepen my research into fintech.
So why is DeFi targeting people who don’t necessarily have money or even safe places to save their money? The basis behind DeFi is that anyone can invest without being an accredited investor and without going through a bunch of red tape. Just like most mainstream companies, they are using the crowd to provide liquidity to their investment. I believe that many companies will be crowdfunded and headed up by people who have been paying attention to these changing trends but not necessarily the traditional investors in their space (audited financial statements).
I do want to touch on one thing in this article I think is important – it’s a quote from the CEO of FTX Global: “DeFi has no standards”. This is very true. DeFi programs are by definition “exotic” and anyone can invest in them if they choose. It’s truly democratizing investing, allowing more people with less access to capital to participate. However, I believe don’t believe the lack of standards is the problem. The problem that occurs is when you have companies whose backers are not doing their due diligence, if they have no standards then they will invest in anything and that can obviously lead to some trouble. This isn’t to say there aren’t companies out there who fill this role which are well managed/backed – there are and I think the SEC was wise in their ruling to focus on the ones that do not.
