Why Decentr’s Zero-Collateralisation Paradigm Means the End of Trade Finance
It is not an over-simplification or exaggeration to predict that when the DeFi loans market is able to offer majority loans at zero capitalisation incumbent traditional financial institutions will be rendered all but obsolete.
This is the paradigm we at Decentr are creating as the future of finance.
Where DeFI Stands
The market for personal loans and peer-to-peer (P2P) loans has enormous potential and, according to Allied Research, is projected to grow at an explosive Compound Annual Growth Rate (CAGR) of 29.7% with the total market expected to reach $558.91 billion dollars in the coming years, with the Total Value Locked (USD) in DeFi in August at $5 billion dollars.
For now, cryptocurrency loans are growing and will continue to grow, due largely to relatively narrow speculative investor interest: this is because these loans give crypto investors access to liquidity, without having to sell their crypto. Crypto lending platforms are not just a place to get money without selling crypto, they are creative tools that help investors buy, sell, hedge and utilize their crypto portfolio to maximise returns.
But this only represents a fraction of the potential of the fully realised DeFi loans market that Decentr is aiming to exploit.
Decentr: What DeFI is Really Capable of
As DeFi currently stands, the biggest drawback is that loans need to over-collateralise. This becomes extremely difficult when an individual or business (let alone a commercial bank, multinational, etc) is looking to borrow large sums of money, or when the borrower simply does not have the necessary collateral.
However, when unsecured or under-collateralised crypto-loans become widely available, we predict DeFi will eviscerate traditional finance and dramatically expand the global lending market.
This will not only improve the lives of millions but massively stimulate supply and demand as well as creating opportunities in research, science and the arts not seen since the scientific revolution and the Enlightenment while releasing previously untapped resources, both human and material, to create hitherto unheard of new businesses, markets and even industries.
This loftier view of what DeFi is capable of is what Decentr is building, including dPay and dLoans, which support all sorts of ancillary dFintech features, including accessing dMortgages and dCommercial loans, as part of Decentr’s dFintech features, all of which is underpinned by the relativistic, data-as-value Deconomy.
How We’re Doing it
Decentr aims to supercharge the DeFi movement by creating a new, more flexible and all-encompassing type of loan function, called dLoans.
dLoans allow users to borrow against the Decentr investing pool, which is comprised of DEC loaned out by users.
Users loan out DEC from their dWallets at an aggregate system APR; however, this DEC achieves higher APR for those users who have earned a high, what we call “Personal Data Value”, or “PDV”.
PDV function functions as a personal “exchange rate” assigned to each user that is determined by a user’s positive Internet usage and engagement, as expressed in data. (Decentr’s core tech creates 100% secure and decentralised dataflow that, when integrated with blockchain’s decentralised data storage, gives data superior “valuation” and “value store” properties to “money”.)
dLoans is unique in that it requires under- or zero capitalisation for users to take out a loan, pursuant to a high PDV — PDV, being in effect a “reputation score”, is the method by which dLoan’s are risk scored on Decentr.
For a user who achieves what we term “majority affordability”, at PDV 1.0001 (where 1 DEC assumes USD $1 for ease of calculation), the assumption is that both ID verification and/or data generation, reuse and exchange is of such a high, sustainable and community beneficial quality and veracity that a dLoan requires zero capitalisation.
Moreover, at majority affordability, if a user takes out a dLoan, for example, of $10, then they only need to repay $9.9990. Better yet, the APR applied to repayments is also determined at a rate that benefits a user with PDV at majority affordability, meaning they pay back less for consistent repayments made over extended periods. As more dFintech products come onto the Decentr market these will not only improve the PDV of users who take out dLoans (due to the data expressed in consistent repayments as part of their built up on-chain payment history) but can also be used as dCollateral to take out larger loans.
For example, if we use an example in the property market: a user who takes out several dBuy-to-Let loans on a portfolio of rental properties, and has a record of repaying these loans back at ever-decreasing monthly repayments (due to improving PDV) at an ever-decreasing APR (also due to improving PDV) would have no problem securing a significantly larger line of dCommercial credit for dBrigding loans and other dProperty related investments.
Better yet, as PDV is a protocol-level feature, the benefits of PDV can be ported across to many of the solutions we are building on, including Holochain, TomoChain and other DeFi solutions such as Aave and Compound, with Aave and Compound having achieved Total Value Locked (USD) at $600M and $900M in August respectively (see below for Key Stats).
Why dLoans is Uniquely Scalable
The dLoans feature, underpinned by the radically-new causal tokenomics common to DEC/Deconomics, is uniquely scalable in a way that current DeFI loans are not, restricted either by the constricting demands of over-collateralisation or the inability to ensure repayments from under- or zero collateralised borrowers.
Decentr changes all this. Due to the nature of Decentr’s ability to digitise assets, the dLoans feature opens up for potential borrowers very large-scale opportunities indeed.
This gives a very good indication of the potential of dFintech/Deconomics to allow dLoans to scale; this is because our PoE protocols always ensure DEC rises at 8–10x data generated, and as a result the DEC in our investing pool can therefore always account for the difference between the dLoan required and the ever-decreasing amount required for repayments.
Moreover, the fact that dLoans actually get cheaper over time, in part due to the data as expressed in regular repayments, but also other user-generated data, encourages users to not only abide by their repayments but also to continue contributing increasingly structured and refined data to the decosystem.
Ultimately, as the dLoan feature has demonstrated, the future of finance is not about “money” (fiat or digital) per se but is about encouraging the increasingly structured and refined, generation reuse and exchange of data in order to leverage this data against increasingly cheaper and more sustainable resources. These resources in turn create improved products and services that more and more people have access to and benefit from — irrespective of their economic, banking or documentation situation.
We look forward to answering all your questions. Please find our official links below.
Official Links for Decentr:
Official Email Address: Admin@decentr.net
Official Website Link: https://decentr.net/
Official Telegram Discussion Group: https://t.me/DecentrNet
Official Telegram Announcements Channel: https://t.me/DecentrAnnouncements
Official Twitter: https://twitter.com/DecentrNet
Official Medium: https://medium.com/@DecentrNet