New Possibilities for DeFi as OpenDAO Deploys Bridge Linking DeFi and Real-World Assets

Andrey Sergeenkov
Andrey Sergeenkov

When compared with traditional finance, the crypto industry is still relatively young. After all, Bitcoin which is a legacy digital asset is only approaching its 12th birthday, which will come on January 3rd, 2021. But despite being a nascent tech, the crypto market has witnessed a remarkable amount of progress over the past 12 years. For one, digital assets have been able to prove that financial payments can function without a third-party institution or middleman.

The crypto sector has also seen a number of innovations alongside the growth of sub-sectors over the last few years. Without going through the entire list of changes the crypto space has witnessed, let’s jump to the latest and perhaps biggest – Decentralized Finance, aka DeFi.

DeFi can be defined as a network of financial elements that are inherently permissionless and open-source. Its decentralized nature ensures that there is no centralized body controlling the ecosystem or third-party interference.

This year, the DeFi sector recorded staggering growth and has even been dubbed “the future of finance.” To put some figures on the table, on August 3, 2017, when DeFi tracking website, DeFi Pulse started monitoring the sector, the total value of locked (TVL) assets in the space was just $4 (no, that’s not a typo.) Fast forward to 3 years later and this value has increased to over $13 billion. As of January 1, 2020, the TVL was only $675.59 million, a growth of over 1900% in less than a year.

A number of factors, including financial uncertainty, are fueling the adoption of digital assets.

But the surprising fact is that despite these promising figures, the market capitalization of the DeFi industry and the cryptocurrency space at large is nothing compared to that of tech giants like Apple, Facebook, or Google. Apple, for example, which have a collective net worth of around $2 trillion.

Meanwhile, the market cap of the entire cryptosphere is $514 billion. When other real-world assets such as real estate (valued at around $217 trillion) and stock ($73 million) are added to the mix, it becomes very obvious that digital assets and decentralized finance, in general, have a long way to go.

To tap into the potential of existing markets that everyday users are already familiar with, upcoming DeFi solutions need to bridge the gap.

OpenDAO Is Already Bridging the Gap

OpenDAO enables real-world assets such as stocks, bonds and real estate to be used meaningfully in the DeFi ecosystem via permissionless, trust minimized, transparent, secure and automated protocols.

If the goal and innovation of OpenDAO is anything to go by, accessing real-world assets from the DeFi space shouldn’t be a thing to be waited for. The blockchain firm’s bridge is already live and will connect on-chain DeFi assets with real-world assets. Individuals across the globe, irrespective of their economic class, will be able to access real-world assets such as stocks and real estate via the OpenDAO platform.

This possibility spells a new wave of highs for the cryptosphere. The ability to access, say the $217 trillion real estate market from a decentralized and boundless setup is simply unheard of.

This bridge is made possible by a team of experts who have core backgrounds in securities tokenization and traditional finance.

OpenDAO’s innovative solution is encapsulated in three core protocols. First, owners of real-world assets can tokenize and stake their assets. Doing so will enable them to mint a stable coin (oUSD) on the platform.

Secondly, the blockchain uses an infrastructure known as Cash Box to create on-chain liquidity against real-world assets. Liquidity providers supply stable tokens such as real estate, invoices, tokenized shares, or wrapped tokens (including Bitcoin.) This setup maintains the ecosystem by creating an efficient liquidity layer on top of real-world assets. Stable tokens supplied to the cash box become a perpetual counterparty to anyone with collateralized tokens. For their efforts, liquidity providers earn fees, as well as OPEN tokens for staking.

Finally, there is an Open Market – “a money market for lenders and borrowers to interact with real-world collateral.” While lenders earn a high yet stable interest rate from providing stable tokens, borrowers can tokenize their real-world assets and use them as collateral to borrow. Both categories of participants are rewarded with OPEN tokens.

In addition to these three protocols, OpenDAO also has a governance model in place. Individuals who acquire the Open governance tokens collectively control the decentralized organization. Their votes will steer the direction of development.

In conclusion, the cryptocurrency market, particularly the DeFi space is still in its infancy stage. As the sector continues to mature more integrations are bound to happen. It is possible that in the future, digital assets could replace traditional financial instruments.