Liqwid is an idea & whitepaper initially conceived in Q1 2020. At the time, the world was just beginning to see the reality of two nightmares unfold. Covid19 was spreading at a seemingly unstoppable rate forcing entire economies to grind to a halt at a time when 60% of global debt is yielding less than 1% & nearly $16 trillion of global debt yielding negative rates. These two macro forces formed the catalyst for the relentless money printing or as Fed chairman Jerome Powell calls it “Not Quantitative Easing” (QE). When you consider these factors the resulting shift of capital into higher risk yield streams can be simply summed up as the “physics of macroeconomics”.
At the same time, there is a decentralized financial system, referred to as DeFi, pioneered by the Bitcoin network and now smart contract enabled public blockchain networks that are flourishing in the global digital economy with cryptocurrencies and digital assets. The debt levels, referred to as total value locked (TVL) in decentralized financial protocols, has grown from hundreds of millions this time last year, to the nearly $12 billion TVL today. This DeFi surge can mostly be attributed to the fact yields on these instruments are significantly higher than their yield in legacy centralized finance (CeFi). The higher yields on DeFi instruments are a result of assumed higher risk levels combined with the process efficiencies provided by smart contract and decentralized autonomous organization (DAO) technologies. Due to these factors and other protocol incentives annual percentage yield (APY) is significantly higher on decentralized protocols than what can be found in the traditional centralized finance system. Historical trends in the physics of macroeconomics are signaling assets will continue seeking higher yield which is starting to play out in real time when you consider the DeFi TVL growth rate. The emergence of DeFi (powered mostly by the efficiencies smart contracts merged with DAO’s produce) represent a 0 to 1 innovation in both legacy traditional finance & financial tech “fintech”. As a result we expect the DeFi TVL growth rate will continue at this pace, potentially even accelerating with CeFi and global macro political developments...
This article was first published on medium.com.
Written by Dewayne Cameron.