In our very first episode we interviewed two of the industry’s leading DeFi experts to explore their views on current and future use-cases, as well as the impact on business and consumer markets. This episode is available with English, Spanish, Chinese, Korean, and Japanese subtitles.
Full Transcript: Beyond Bitcoin – DeFi with Algorand, Algomint, and MeldVentures
Leyla: Hello everyone and welcome to Beyond Bitcoin, a new monthly series where we break down the latest trends in cutting edge technology, blockchain, and beyond- And why it matters to you!
My name is Leyla and I’m co-hosting on behalf of BSN Global. And joining me is ShareRing’s Communications Manager Timothy Kingery.
Timothy: Thank you Leyla!
and with us today for our series premiere we’d like to welcome our industry experts:
Summer Miao, Head of Community Asia Pacific for Algorand Foundation
and Michael Cotton, Founder of MeldGold and Co-Founder of MeldVentures and Algomint, here to share their insights and answers to the real questions that matter about DeFi, thank you both for taking time out of your busy schedules to join us!
Summer: Thank you
Michael: Thanks for having us
Timothy: Starting off, can you tell us a little about yourselves and how you came to work for one of the top blockchain companies in the world?
Michael: Thanks Timo,
I started the Gold industry straight out of highschool, so with the money I’d saved up working through highschool I started building my own gold business.
That business went on to be one of the largest gold companies here in Australia, so now currently employs 60 staff and is spread across the country including one the highest-rated security vaults for precious metals in Australia.
And then around 5 years ago I started looking at blockchain tech and really loved the concept and loved the idea. For me I saw the true innovation and I saw the future and what really held, and then we started building out this concept of bringing gold to blockchain and really creating a gold currency once more.
Since then we’ve gone on to partner with companies such as MKS PAMP, the largest gold trader in the world, based in Switzerland, Heraeus out of Asia, and Perth Mint here in Australia.
And then I head up MeldVentures- an Australian-based technology investment company. And MeldGold is really moving it’s way through to become the digital gold standard for gold across the world.
Leyla: Wow, that is incredibly impressive, Michael
Your passion for gold and innovation have clearly paid off, so thank you so much for sharing your experience with us today.
Michael: Thank you
Leyla: Summer, how about you? What brought you here?
Okay so actually, it’s an interesting story with a series of happy coincidences-
So I joined the blockchain space in early 2018 – back then I was still working in the traditional education industry.
Then there happened to be a blockchain startup looking for a senior marketing fellow. That’s the first time I heard about the word “blockchain” and I did some research out of pure curiosity.
You see, 2018 was the year when Bitcoin turned 10, however, many were still skeptical towards Bitcoin and the technology behind it. And after vast research, I was able to have a better understanding of the blockchain and I was amazed by the beauty of the idea and the great potential behind it.
So I thought to myself, okay, “This might be the next generation of the “Internet”, and look how the internet has changed our lives and become something that you cannot live without. This might be something.” So with these expectations, I decided to change the direction of my career and I took a leap into the blockchain industry.
Then, one year after, another happy coincidence happened; Algorand Foundation started seeking a team member in Asia for local community building. That’s when I seized my moment and luckily I became part of this great team.
Timothy: Excellent story, I really resonate with that view of it being like the new internet! Thank you for sharing that with us.
And judging by their popularity and lead in this industry, it’s easy to say joining Algorand was a wise choice!
Your team has climbed to the top of the charts in terms of market cap and has established itself as an industry-leading DeFi platform of choice by many new DeFi blockchain companies, with Algomint here being just one of many promising projects.
But for those of us in the industry two years ago, DeFi wasn’t really in the headlines at all. What stuck out to you about Algorand, of all blockchain companies?
Summer: Okay so without a doubt, Algorand is a world-renowned project which has attracted global attention with everything it’s launched, and as you might know there is intense competition in the public chain sector.
So to me, Algorand stood out from the rest for a few big reasons:
Firstly, and maybe most importantly, is the Algorand team and it’s leadership:
Our Founder, Silvio Micali, is also a Turing award winner. He is the co-inventor of many widely-used blockchain protocols, such as Zero-Knowledge Proofs, Verifiable Random Functions, and the Probabilistic Encryption.
Many of which have also served as the foundation of modern cryptography and under his leadership we’ve got some of the greatest minds in the industry leading us. That alone gives me confidence that Algorand would succeed.
Then the technical aspects:
Algorand has managed to find an approach that solves the blockchain trilemma without any compromise.
So, a little background here, the blockchain trilemma is one of the main challenges that blockchains have faced throughout the decade in which the three key objectives:
Source: SEBA BANK AG
Summer: Couldn’t be fully achieved without sacrificing at least one of them.
So Algorand, by employing a novel pure Proof-of-Stake consensus algorithm solved the trilemma and created a truly secure, fast, and scalable blockchain platform.
One fun fact: the name Algorand is a combination of two words: Algorithm and Random – So we call our approach Algorand, because we crucially rely on algorithmic randomness for it’s efficiency
And it’s also worth mentioning that Algorand has a fast-growing ecosystem, and many use cases are from traditional industries. So, a number of companies, actually so far seven hundred have chosen to build on Algorand. So all of these reasons certainly helped my decision to apply, yeah.
Timothy: That’s a fantastic explanation, and with that in mind I can see how it was an easy choice!
And that’s really impressive regarding your Founder too, Silvio, I didn’t know he played such a big role in developing those protocols!
Zero-Knowledge Proofs, Verifiable Randomness, that kind of stuff is used by so many different blockchains, that is really fundamental to this industry, that’s amazing.
We’ll include a link in the description below if you’d like to learn a little more about these after the show. But before we get too far, we’d like to break down in the simplest terms possible what exactly IS DeFi?
And what impact will this have in people’s lives?
Summer: Okay, I’ll take this question-
DeFi is short for “decentralized finance,” it’s a term for a variety of financial applications in cryptocurrency or blockchain to disrupt financial intermediaries.
To put it more specifically, DeFi stands for financial services with no central authority. So DeFi takes out traditional elements of the financial system, such as exchanges, or banks; and it replaces the middleman with a blockchain smart contract.
Okay, so you may ask: So no intermediaries to steal a part of my cake, what other advantages does DeFi have compared to traditional finance? And what impact will it have for the world?
So, First of all, DeFi will make financial services more accessible and everyone will have a fair chance in the financial system. All information which are required when creating a bank or a brokerage account, such as the government-issued ID, Social Security number, or proof of address are not necessary to use DeFi. So this is especially helpful for those who are unbanked in Africa and Southeast Asia who have no access to basic financial services.
Second, no central party or authority can reverse transactions or turn off the services. So you can control your assets independently, all transactions are publicly traceable, and you know exactly where your money is all the time.
And last but not least, transactions are enforced and governed by the “smart contract.” Basically, money is programmable according to predefined computer code, which is publicly available for anyone to audit. With these, DeFi can be applied in real-life services.
Take insurance as an example – just think of regular insurance – except that the rules of insurance events are encoded and the claims are paid out automatically – how convenient is that!?
Michael: And to add to what Summer is saying as well, I think the other piece of this is not just allowing users to access these services, but it’s really giving some of the brightest minds in the world the freedom to build out these products.
And the barriers to entry for financial products is extremely high, where as in the DeFi space and the blockchain space, you know, those with the best ideas and the strongest capability can actually deliver valuable products with a lot more ease.
Leyla: Well, that is truly fascinating, thank you for breaking that down for us
So, you explained DeFi includes a number of financial products and services,
Could you tell us about some of the most popular and how they compare to their counterparts in traditional finance?
Summer: Okay so, imagine trying to invest a single dollar in a way that would have any tangible return as an asset without being high risk? It’s virtually impossible. Even with financial inclusion, price point accessibility is not enough.
Through DeFi solutions, the users will be given the chance to take part in trading global tech stocks through a digital tokenization model that divides one share of a traditional equity into an individual 1/10,000 micro-equity token of representative value.
This will advance microfinance by moving beyond micro-loans into micro-equity that can create wealth regardless of socioeconomic standing. So, this is actually the work of focus of MESE, one of our ecosystem partners, they are providing accessible wealth creation tools to the underbanked. MESE is a micro-equity stock exchange powered by the Algorand blockchain they aim at letting users invest very small amounts in selected stocks.
This is made possible as the negligible transaction fees on Algorand allow MESE to provide micro-equity token shares that would not be viable at a chain with substantive transaction fees.
So you will be able to hold one crypto-based micro-equity token of big companies like Microsoft, Apple, Tesla, Twitter, Amazon, or Google, which is to hold a cryptocurrency that represents 1/10,000th share in a real stock.
Michael: And to add to that as well and I think Summer touched on it briefly is in terms of micro-loans, the other really interesting part this opens up then is the ability to then take micro-shares or take assets in companies like Google or Apple and actually access loans against those assets.
In the traditional space that’s an incredibly difficult task and in most cases non-existent. But, within DeFi, the ability to do that in a trustless way, in under a minute, and access a loan at really competitive interest rates is a really fascinating piece of the puzzle.
Because, number one, it allows people to access opportunities they might have before them that they may not want to sell their current holdings in other platforms, yet they want to take advantage of this opportunity –
Or, alternatively, they might just need a short-term loan, they might be short on funds, or have an emergency, you know, it happens to the best of us.
So the ability to access those funds quickly, easily, and at a much better rate is really important.
Tim: Very Cool!
Some of those stocks are prohibitively expensive, the last I checked you can’t buy a share of Google for under $2,000.
So will this be as easy as buying stocks with any other app? Or will it still require some cryptocurrency knowledge?
MESE aims to make the investment as easy as possible, so the experience will be no different than using the other app.
I believe the key to mainstream adoption is to make blockchain invisible for users. While the user is using the service based on blockchain technology, they won’t need to understand or even realize it’s blockchain related.
Just like nowadays, we are using all the services enabled by the internet, but for most of the users, they don’t quite care what technology is behind this.
Tim: Well said,
Yeah, I think a lot of us would agree with you there, most don’t really care how the TV works on the inside, we just want the entertainment that it provides.
I think as more blockchain products become more user-friendly focused like ordinary apps, we’ll see a huge increase in adoption.
So these DeFi loans seem like a no-brainer, you know, if you do the math comparatively with their traditional finance counterparts, but if you’re already savvy in Bitcoin you’re probably not too excited at the prospect of low double-digit returns on the year.
But for the millions, or billions of people who don’t necessarily enjoy the thrill or inherent risks of investing, when do you think DeFi loans would be in the hands of ordinary users, like my neighbor Bill?
Is anyone working on making this like, really mainstream?
Summer: Yes, that’s what we are heading to, right?
I think the key question behind this is “when will blockchain technology obtain mainstream adoption?” or “Is blockchain technology business ready?”
So while the benefits of blockchain are clear, for blockchain use cases, such as DeFi, if it wants to be welcomed into mainstream adoption and become an alternative for real-world use cases it has to solve issues like high execution cost, scalability & speed, and the security issues.
To advance ahead, the industry needs a next-generation, open-source, permissionless blockchain being decentralized, scalable, and secure with a built-in transactional speed and low fees to power real-world use-cases.
I believe Algorand is one of the ideal platforms to push blockchain into mainstream adoption. And hopefully your neighbor Bill and my friend Jane will soon enjoy the blockchain services with ease.
To be honest, it will take some time but it will be worth the effort.
Michael: I think too, as Summer said, blockchain really does need to be invisible for broader adoption,
I think it also creates opportunities for people like Bill to understand the technology and really come to terms with the idea that it’s secure, and it’s an incredible tech, but it’s also not that scary.
Another benefit of DeFi is that those usual roadblocks that I said earlier for entrepreneurs and developers to create interesting products are dramatically reduced.
So there is definitely a great variety of products both live and coming, and as we do start to see new generations of Blockchain technology coming to market like Algorand, we are seeing more secure options arise, which inherently means broader adoption is coming.
For example, at Meld Gold we are working with several new projects launching on Algorand blockchain to create yield with Gold, something that’s almost unheard of in the traditional sector.
But the brilliance of Algorand and several of the products building on top of this incredible technology is they are making it easier and easier for people like Bob to access these kinds of opportunities.
Timothy: Gold Yielding!?
If I’m following you correctly, that’s a way to earn an Annual Percentage Yield from gold you own that you would otherwise be just sitting on?
Can you tell us a little more about this?
Michael: Yeah, of course, traditionally assets like physical gold have been cumbersome to deal with, store, and move.
But with Blockchain technology, once that gold is digitized, you can now own that gold. It can be vaulted and stored, trustlessly accounted for, and have a digital representation of that gold on blockchain, which opens up a whole new world of opportunities.
In reality, it’s essentially unlocking the value within gold that traditionally would not be accessible. Now with your gold represented digitally you can utilize DeFi via platforms, like some of the lending platforms coming to Algorand to earn yield on that gold like you would in dollars or other currency.
Timothy: Wow, yeah that’s the first I’m hearing of anything like this, that’s brilliant!
So aside from the consumer products and benefits we’ve discussed, are there any DeFi products or services that you think would be useful for businesses?
Michael: Most definitely, all the advantages Blockchain brings to consumers play out for businesses as well. As you can imagine they are just larger transactors and larger equity holders, so the value is just multiplied.
Taken by the same token, the ease of use for businesses is also key, it needs to be invisible for businesses just like it is for consumers. And with all the advantages Blockchain brings and how incredibly powerful the tech is, imagine if it was as user-friendly as the apps we are using today.
Summer: Yes, It’s a wonderful thing to see the convergence between the DeFi products and the traditional business.
I would like to share a good example:
Opulous, it’s one of the DeFi use cases building on Algorand.
It’s a decentralized peer-to-peer DeFi loan platform that provides artists with a more direct and accessible way to secure funding. Also, it offers everyone a fair chance to invest in one of the world’s fastest-growing and most lucrative industries: music.
Opulous loans are backed by future music royalty earnings and copyrights. Unlike cryptocurrency, these assets have predictable future values and carry no risk.
The platform will analyze a borrower’s music data and copyright assets to ascertain how much money they are eligible to borrow. It will then establish a custom loan repayment plan based on their predicted future earnings.
Musicians currently earning a steady royalty income will be eligible to receive up-front loans equal to the value of revenue they generate over 12 months, paying as little as 4% in interest rates.
Michael: And beyond just Bob we’re also now seeing institutions and startups and corporations looking at what DeFi can offer.
For example, on the start-up front, a tech startup raises $5,000,000 to develop / expand on their project, and rather than sit earning bank interest they can utilize DeFi to generate stronger, meaningful returns to add to their development fund, really increasing their runway and increasing their likelihood of success.
And I agree with Summer about Opulous, you know, as one of the more interesting use cases, allowing artists to digitize future music royalties on blockchain and reducing that friction in market entry while delivering value both to creators, investors and fans is really interesting.
And I think this really opens up what we’ll see in some of this next generation, which is the kind of concept where, for example, farmers could take their future crop yields, digitize them, and gain loans at better interest rates with less friction.
Leyla: So fascinating, well, you both touched on a lot there, but I’m intrigued about the applications to music.
Is this something that would combat the piracy problem causing musicians to lose revenue since file-sharing and torrents became so popular?
Michael: Great question, Blockchain technology via NFTs does help solve this.
This is a fairly new area with a lot of development happening as we speak, but even right now, a song can be loaded into an NFT via hash code and played through a decipher; which means only an original can be played.
But, the brilliance of that is if you get sick of a song, you can actually trade and sell it on the secondary market.
And then what we see happening is royalties can then be attached to those NFTs and the actual original creating artist can still receive royalties on-chain, completely trustlessly, over time.
And with Algorand this can all happen at lightning-fast speed, at incredibly low cost, and with each component in a trustless manner.
Timothy: Wow, that is a fantastic concept, I think a lot of musicians would be thrilled to learn about this, but I think we’ll have to save a deep dive into NFTs for another episode!
Moving forward though, with this new array of DeFi financial products on the way, do you see this causing more banks to downsize or close?
Are banking jobs or loan officer jobs being eliminated?
Michael: Look, I think it needs to be looked at from a different lens, and I think that’s the innovation lens.
If DeFi becomes truly a challenger to traditional finance, which I think it is well on it’s way to being, we won’t see the banking industry die out.
I think we’ll see them be forced to change– adapt, innovate themselves, the difference is normally the changes aren’t this drastic. This is one of the rare occurrences where we see huge leaps forward and the market trying to catch up while being wary of what it holds.
Summer: Yeah, I agree with Michael, so for central banks, cryptocurrencies are now considered a potential threat. However, we can see that when facing the threat, banks are making positive changes to adapt to a new technology trend.
As one would say, If you can’t beat them, join them!
Banking and governments hold the most power in the world, it may be naive to think that they will stand by as crypto and blockchain replace them.
At this point, nearly all world powers have considered releasing a digital version of their currency from their central bank — the main reason is to head off Bitcoin and crypto from gaining too much momentum.
The new reality tends to look like centralized authorities will be adopting blockchain solutions to avoid the risk of being extinct.
Leyla: I think a lot of us would be happy to see financial services across the board improve, even if they’re simply forced to, to remain competitive!
How do you see DeFi maturing over the next 5 years?
And what sort of products do you think will go mainstream and how will that affect the current players in the industry?
Michael: I think we’ll see a lot of the current players adapting to meet the market, so we’ll see a lot more adoption from the financial sector and the traditional sector coming to blockchain.
With these additional funds and power coming into the marketplace, we’ll see further accessibility and broader acceptance.
As always, you know, additional competition always brings additional innovation, you know, the more competitive the marketplace is, the harder those within the marketplace work to remain an edge and be competitive and also meet the market in terms of what the demands are.
In terms of interesting new products and concepts coming into the marketplace, there’s a huge spectrum of great things coming, but one of the ones that I like most is trustless funds management.
This is kind of a new concept, and the idea is:
Rather than giving your money to an institution where you deposit and you wait to see what the sort of interest levels are and really trusting a third party to hold those funds and deliver that return–
It’s actually done via smart-contracts, which is a trustless vehicle that allows you to:
One, see all the investments that are being made, but also allows you then earn a return via that vehicle without having to trust that third-party, really removing that element of counter-party risk, where someone might disappear with the money isn’t actually possible in a vehicle like this.
So it really is a new level of transparency for investments.
Timothy: Wow, yeah that’s really interesting, so just to clarify for our audience, you said there is no institution to deposit my money with, so this is a non-custodial solution?
So the money is in my possession and in my control the whole time rather than with the fund manager, but still being traded?
Michael: Yeah so, Tim it’s actually non-custodial in the sense that it’s not actually controlled by anyone else,
It’s actually controlled by the smart contracts, so what it means is the only one who can actually access and withdraw the funds is you.
I think the other piece to add to that which I think is really interesting as well is with this new generation of automated or autonomous funds management any investment can be made,
it’s not a matter of investing a million dollars, you could invest as little as $10 in a project like this. Which is another interesting element that really changes how we’ll see the new financial structures.
Leyla: I’m always wary of trusting anyone with my money, and I think a lot more people would be receptive to the idea of managed investing if they could maintain control of their funds at all times.
While we’ve been talking about more of the basic level of use cases, what interests you the most about the DeFi space?
And is there any sort of milestone or advancement you’re really excited about?
Summer: Okay, I’d like to share with you the recent updates regarding Algorand:
We will continue to grow our ecosystem in various aspects including DeFi and NFT, and especially the stablecoin ecosystem.
So, there have been a lot of stablecoins issued on the Algorand blockchain such as USDT, USDC, Euro (Monerium), Candian dollar (QCAD), Brazilian Real (BRZ), Turkish Lira (BiLira).
We are also collaborating with our partners on the digital version of the local currency, such as Mexican Peso, Indonesian Rupiah and also, Japanese Yen.
As a project we are investing a lot of our resources and partnerships into working on various stablecoins that are beyond US dollars.
This way, it will enable more DeFi use cases, with massive social impact. And we expect to unleash the potential of stablecoins and accelerate the convergence between decentralized and the traditional finance.
Timothy: Very cool!
For those of our audience who may not know what stablecoins are, these are digital tokens backed and redeemable 1-for-1 with their paper counterparts.
The primary purpose of this is to make them easily tradable across all cryptocurrency exchanges and DeFi platforms.
While there are some tokenized forms already available for most common fiat currencies, such as the US Dollar with USDT, USDC– Algorand is forging ahead to add many more, so that’s definitely something to keep an eye on!
And Michael, what are you most excited about coming up?
Michael: We have a really strong focus on what the future of DeFi looks like, what does the next 10 years look like for this next generation of finance?
Working really closely with a lot of the Algorand building community I get first-hand view of what’s coming and what’s being developed.
So for me, you know, talking with all these other projects, for us where the focus is on creating the most collaborative and powerful ecosystem we can that fills in all the pieces of what a traditional ecosystem or financial ecosystem requires. And ensuring that in that development we’re also making sure it’s a really inclusive environment.
This is something where the entire world can adopt and participate, and doesn’t exclude any particular party, which I think is a really important part of where we’re heading.
Leyla: That sounds very exciting, Can you expand on the ecosystem you envision?
And what sort of other DeFi financial products do you see becoming commonplace in the next 10 years?
I think the key thing to keep in mind is we shouldn’t force technology like blockchain where it doesn’t belong. Likewise, where it is more valuable over the alternative option it should 100% be adopted.
In broad terms, at its core, anything that removes the need to hand over control of your assets, such as dollars, or some of the new generation of assets, such as your personal information or medical history, is something where blockchain fits really perfectly.
The other side of this is removing friction, cost, adding speed, or creating certainty in a transaction. This is another really valuable set of components that bring real value within the blockchain space.
This ecosystem could expand into things like controlling your own pe