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Sunday, September 10, 2023

DeFi Is Just A Bomb About To Explode

The current lineup for the landscape of DeFi mostly consists of SAPs or synthetic asset platforms, which could be heralded the next year. An SAP is simply a platform that would enable users to mint synthetics which are derivatives whose values have been accrued to assets that exist in real-time.

As long as the oracles will be able to supply a price feed that is supremely reliable, most synthetics would be representing any asset that is present on earth, and end up taking its price- which could be a crypto asset, a commodity, or a stock. 

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DeFi’s SAPs Could Get Dangerous

Therefore, it can be easily understood that SAPs are getting ahead and linking the gap between legacy finance and emergent platforms of DeFi, which would allow investors to place any and all of their bets of any single asset anywhere- and all from the confines of their favorite blockchain system of all time.

Decentralized and operational on layer one of Ethereum, SAPs would turn out to be the next major catalyst for the growth of crypto. However, there is a catch to all this. Unlike verifiable artwork and sound money, in the world of lending that is collateralized, secure ownership and decentralization don’t end up solving the entire problem. 

Unlike DeFi, in traditional finance, the instruments of collateralized debt are usually thought to be one of the most promising financial assets in the world, as they boast of a cumulative valuation that comes at nearly $1trillion. Most of us would think of it as mortgages. Needless to say, mortgages do convey the anguish and the agony that is in stock for those who become a part of collateralized lending without really understanding the risks and the consequences that come forth with it. 

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The current problem erupts because DeFi is currently at a position where it is stagnating and has reached a plateau. Most of the meaningful progress does demand a tokenomic model for the management of collateral that could bring about excess risk exposure.

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