Paul Brody’s predictions for 2021 lead EY Blockchain’s predictions: financial institutions will offer decentralized finance (DeFi) to a consumer audience.
“If I had to make a bold prediction,” Brody told CoinDesk last week, a single transaction window for a large customer base. “
Brave indeed. Big institutions may be passionate about digital assets, but DeFi, the growing bricolage of crypto lending platforms (valued at over $ 25 billion), isn’t for the uninitiated.
EY’s blockchain team is always talking to banks and corporations, Brody said, and big corporations see things like the Bitcoin numbers published by Square for their Cash app (with 700% annual growth) and want a piece.
Brody has received high praise for his attention to privacy technologies such as knowledge-free evidence and how such techniques can help bring public blockchains into corporate firewalls. Most recently, Brody and ConsenSys engineer John Wolpert created the Baseline Protocol, an Ethereum-based voting system for companies.
When asked which big companies he sees bringing DeFi to market for consumers, Brody assumes that it will be done through app services: the Robinhoods, PayPals and Publics of the world.
“It will be one of the newer generation app services that are busy putting everything into a single transaction window where you can buy crypto, make bank deposits, buy stocks, etc.,” Brody said.
However, industrializing DeFi connectivity won’t be free for everyone, Brody added. “It’s going to be a very carefully crafted set of offers and companies really need to think about how to explain these things and sell them to the public.”
Main ingredients
According to Brody, two main catalysts will help make this DeFi conversion happen. First, the testing, verification and hardening of smart contracts; second, the inclusion of regulated stable coins in the room.
“Regulated stablecoins will make this a more mature sector for institutional investors and for the big bucks,” said Brody. “And while some traders believe that crypto’s volatility is a characteristic, not a bug, DeFi’s value proposition is not based on crypto’s volatility. It is based on the ability to use your money automatically. “
One final piece of the institutional DeFi puzzle is the introduction of real assets into the on-chain space.
“It can’t just be other virtual assets,” said Brody. “It has to go beyond whether it is a plot of land or an inventory that can be used in an automated DeFi ecosystem.”
Bringing real assets into DeFi is a tempting idea, but there are tricky questions about how to tie the on-chain world into the real world, how to resolve disputes, and so on.
“This is where I’ve long believed that independent third parties play a huge role,” said Brody. “I believe there is no algorithm or voting process that you can use to resolve disputes.”
