jack forlines retweetledi
This past cycle has opened my eyes to few key constraints in DeFi:
> DeFi is self-referential. We trade ETH because people trade DeFi tokens on ETH and we use DeFi to trade and lend ETH. Our yield is endogenous, therefore purely a product of reflexivity.
> Endogenous yield farming is not entirely unsustainable. There’s lots of opportunity in being early to a new economy. New money (SoV tokens) also demand supporting financial products. But, at this point in its growth trajectory, DeFi requires more secular demand.
> IMO, the best use of core DeFi primitives (lending and borrowing, perps, AMMs, vaults, etc.) is as a substrate for RWAs.
But launching onchain RWA vaults is significantly more difficult than crypto ones.
Asset selection, tokenization, deal structuring, haircuts, pricing, liquidations – the entire stack carries more complexity. Real-world collateral also requires legal enforceability, real-world recovery mechanisms, and counterparty relationships that don’t resolve onchain without trusted intermediaries.
All the above is context for why I’m particularly excited about @BirchHill_io and @GromaCorp’s onchain credit facility built on @yearnfi vaults. Groma’s REIT holders can borrow against otherwise illiquid equity onchain, while USD lenders earn yield uncorrelated to crypto markets.
This is a meaningful step towards bringing higher-quality, less cyclical yield onchain, and one of the clearer paths I’ve seen for DeFi to reach a larger audience than it ever could’ve on pure tokens.
Birch Hill@BirchHill_io
English
