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  • Adam Yarnold

"10.5bn of crypto collateral looking for returns ... " Week 40, Blockchain+Banking

quote from press release of Sygnum bank, announcing a 250mln investment program of buying Blackrock iShares short-term Treasury ETF as collateral for a DeFi lending program. At Fin3, we believe that finance will run on blockchain at some point in the future. 2022 has been filled with first-mover examples: this week it was MakerDAO, a DeFi lending protocol, setting up a program to purchase shares of two US Treasury ETFs and one IG corporate bond ETF. What does that mean and why is it important? Second question first - it's important because the technology invented around crypto technology, which is generally called "Decentralized Finance", or "DeFi", has the potential to make our financial system much more efficient. Today's system is a hodgepodge of excel spreadsheets, Frankenstein-like homegrown systems at different banks, and a bunch of people scrambling around on email to make everything work. DeFi technology uses cryptography and distributed computing to make lending, borrowing, and trading fast, cheap, and efficient. It's our belief that regular finance is going to adopt this technology at some point, and what Fin3 offers - the ability to send money via the blockchain (with a direct connection to your bank's software) - will unlock a better/faster/cheaper banking system at low cost for everyone.

Re. the first question, what is this announcement about? DeFi lending protocols are ways for people to lend money and receive interest. DeFi technology lets you do this more quickly and efficiently than most existing ways in our regular financial system. Historically, though, the "interest" you received for lending your crypto tokens has been other crypto tokens. For most normal finance people, that is silly at best and at worst, conjures up a word starting with "p". The reason this is a gamechanger is a DeFi lending protocol called Maker is going to invest in real dollar interest paying assets and use those to pay interest to its token holders (at a high level, obviously).

We think this is a big deal because it's a step towards owning a tokenized version of a financial asset and receiving interest from that asset over a technology platform, DeFi. It's another step towards adopting DeFi technology to make our financial system better/faster/cheaper, and if done in the right way (regulatory compliance, etc.) this can remove costs and make the financial system more inclusive.

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