Mark Cuban Explains Why Crypto-Based DeFi Will Disrupt Banks
Billionaire investor Mark Cuban is optimistic about the growth of DeFi applications, or decentralized finance, and believes they will be a challenge for traditional banks.
For him, “the fundamental advantage of DeFi is that it simplifies borrowing for personal purposes”, Cuban tweeted Thursday in response to a debate on DeFi.
“It’s complicated to borrow money from a bank,” he said. “And [DeFi] allows anyone with funds to also be a lender. “
DeFi apps aim to recreate traditional financial systems, such as banks and stock exchanges, with cryptocurrency. Most run on the Ethereum blockchain.
As Cuban mentions, through DeFi Loan, users can lend cryptocurrency, like a traditional bank does with fiat money, and earn interest as a lender. The barrier to entry for borrowing is low compared to that of a traditional system. In most cases, the only requirement for taking out a DeFi loan is the ability to provide collateral with other crypto assets.
“[B]Businesses, decentralized or not, tend to benefit when they offer customers the path of least resistance to get what they want and / or need, ”Cuban said. “DeFi is not monolithic. It’s competitive. It will evolve to meet customer needs. “
Cuban admits DeFi won’t “automatically end banking” because “banks aren’t dumb,” but predicts DeFi apps will always disrupt the traditional space. “As [how] fintech has selected features that have opened the door to applications that have attracted millions of customers, I think DeFi will evolve in the same way, ”he said.
“Some industries are against change. That’s the innovator’s dilemma. Banks could have simplified / automated to the point that DeFi wasn’t needed. They didn’t. They’re so stuck in it. heritage [operations] they are disturbed by simple fintech, ”continued Cuban.
However, DeFi is much riskier than a traditional bank for a number of reasons.
On the one hand, there is no regulation or insurance on your money when using DeFi, and due to the volatile nature of cryptocurrency, investors should be comfortable with large fluctuations. of price. In the event of a downturn, the value of crypto assets used as collateral can drop sharply and some investors may have their positions liquidated. That’s why experts warn investors to only spend what they can afford to lose.
Even Cuban admits that “DeFi is a platform that can be ripped off.”
Going forward, Cuban predicts that the “big players” in DeFi “will be in favor of regulation” because it “will allow the industry to grow and still have a Wild West aspect,” he said. .
Cuban has long been a supporter of DeFi and the crypto space as a whole. It has a large crypto portfolio with investments in bitcoin, ether, dogecoin, and other altcoins, as well as NFTs or non-fungible tokens, and plenty of blockchain companies.
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