Hackernoon logo"DeFi Will Look at Traditional Finance From Above" - Sean Qian by@Sergeenkov

"DeFi Will Look at Traditional Finance From Above" - Sean Qian

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Andrey Sergeenkov Hacker Noon profile picture

@SergeenkovAndrey Sergeenkov

Cryptocurrency analyst. Founder and editor at btcpeers.com

Following the devastating effect of the pandemic, the world has quickly realized that it has to adapt to the new fickle environment – otherwise it will not withstand the hardship of Covid-19.

Same goes with respect to the financial markets. While for a long time it has been considered as a safe harbor (with exception of some unwonted events, like that of the crisis of 2008), it has now proved its inability to sustain the balance during the turmoil that embraced the whole world. Now, it became clear that the new solutions have to be found and brought to life. 

Decentralized finance has been one of them. Given the first boost during the spread of the cryptocurrency, it has gained rise at the time when the old-world order has proved to be incapable to undergo big changes. As the result – much more people are interested in DeFi, while the stock market, with even occasional booms, is still a long way out to be fully back to shape.

However, the line between the financial world and DeFi is still quite wobbly. Stocks and tokens exist in different realms, being unable (with small exceptions) to bridge and connect with one another.

This has provoked a lot of uncertainty and skepticism among additional asset class owners, who are still finding it hard to adjust to the new way decentralized finance is managed. But now it all has changed – here comes a solution to destroy the gap and create unity between two distinct universes.

OpenDAO came as a way to allow real world assets, such as stocks and real estate, to be used as collateral within decentralised finance. From now onwards, it is possible to lend and borrow against the stock of big tech giants like Apple and Facebook. This bridge is facilitated by OpenDAO through its various protocols, which will all be governed by holders of its governance token - OPEN. 

The CashBox system is a novel system developed by OpenDAO. This protocol allows the creation of an on-chain liquidity layer to be created against real world assets, allowing these asset tokens to be treated like any other ERC-20 in DeFi currently, without the need for lenders to deal with off-chain enforcement.

Now, I’d like to shoot a few questions to Sean Qian, co-founder and operations lead, of OpenDAO, the one who showed his readiness to share expertise and bring up a few insights on how the pandemic can be dealt with.

Andrey Sergeenkov: How have you arrived at the idea of OpenDAO? Have the recent global events had an influence over your line of thoughts?

Sean Qian: We conceived the idea of OpenDAO long before the pandemic started. Our team has a background in traditional markets and in particular real estate development financing. However, the launch of our platform happened to be at the same time as Covid-19 took over the world. As the world started to lockdown, we became ever more convinced of the power of DeFi for its permissionless and borderless attributes. DeFi has also shown great resilience during these unprecedented times, and we believe bridging real world assets to DeFi in a meaningful way is the only way the industry will grow to its full potential.

Andrey Sergeenkov: Developing this idea, do you see any opportunities of the financial market recovery on a close horizon? Let’s say until the end of this year?

Sean Qian: In all honesty, I’ve never been able to time the financial markets, otherwise I’d be a lot wealthier than I am now. Things do seem to be looking up currently though, especially on the back of some positive vaccine news and a new US president which the markets seem to like. Bitcoin and DeFi also currently seem to be enjoying a bit of a bull run which is always a good way for drawing more people and interest into our industry.

Andrey Sergeenkov: In what way is DeFi different from traditional financial markets, in your opinion? Do you think DeFi will ever come as a full replacement for them?

Sean Qian: I think it’s highly possible. Of course, that will not happen fast, it may take years or even decades. For now, DeFi is still in its infancy, and still lies far from the scale, complexity and rigidness of traditional financial institutions. However, I do believe the day will come when DeFi will look at traditional finance from above. The reason is quite simple – DeFi assets are easy to use, open, accessible to everyone, fast to transact and impossible to lose. They already marked a new stage in the development of finance, and I’m sure in the future this trend will only grow.

Andrey Sergeenkov: The truth is that DeFi is unstoppably multiplying in value, but sceptics claim that it may soon exhaust all of its growth opportunities. What’s your take on this?

Sean Qian: So far, I think, we are extremely far away from its limit. All of crypto’s $500B market cap, let alone DeFi, isn’t even as big as Apple, which is only 1 company! I would say, as long as people come up with creative ideas and look for ways to break down complex problems – DeFi will multiply in value and thrive. Moreover, more and more links will start bridging DeFi with the traditional financial universe – just look at the project we came up with. I do believe both DeFi and OpenDAO and some of our partners such as UMA have the potential to play a big role in the next growth phase of DeFi.

Andrey Sergeenkov: Thanks for sharing your perspective, I’m inspired by your confidence. However, there are many traditionalists that prefer to stick to the traditional asset classes, despite the evident benefit of decentralized assets. What could explain that?

Sean Qian: Unfortunately, people tend to be hostile and cautious when it comes to innovations the world has never seen before. Phones, automobiles, software programs, even the internet – who could have predicted that it will take over the whole word and become the most important part of our lives? Same goes for blockchain technology, and now with decentralized finance. This is not unusual, and I guess it’s a part of human nature to be less friendly about something new unless we actually experience that and can understand it.

The beauty of what we’re doing is allowing people to do what they are used to doing in terms of traditional markets and stable asset classes, except in a permissionless and borderless way.

Andrey Sergeenkov: So far, OpenDAO positioned itself as an effective way to link two worlds – real world and DeFi – into one. How likely is it to turn the public eye towards the field of DeFi?

Sean Qian: Well, we hope very likely, since that’s our entire mission! We want people from the traditional world to utilise their assets to unlock value in the DeFi world whilst at the same time giving DeFi investors and lenders the ability to gain exposure to these real world assets.

Andrey Sergeenkov: Tell me more about OPEN. Why does OpenDAO need a governance token in the first place?

Sean Qian: Well, the first clue is in our name OpenDAO. We designed the system from day 1 to be a DAO, where our users will ultimately control the protocol. Anyone can participate in governance by holding OPEN tokens. Additionally, 50% of the tokens are reserved for community incentives such as liquidity providing and staking - this way we can get the governance token to as wide distribution of users as possible.

Andrey Sergeenkov: Not too bad! I’m also interested to learn more about another feature of OpenDAO - Open Market. I’m aware about the current challenge with DEXs to keep the level of liquidity sufficiently high, so that users can always exchange their tokens with no hurdles. How do you ensure this aspect is well-maintained?

Sean Qian: Because the collateral on the Open Market is largely stable, real world assets, where seeing less lenders tend to stay in for longer due to the stability and consistently like yields. After public launch we’ll also be rewarding both lenders and borrowers with our OPEN governance token, which will provide a significant incentive to transact on the platform, thus keeping liquidity high.

Andrey Sergeenkov: How do you think OpenDAO and the asset backed stablecoin will perform in the future, especially in the time span of a few years?

Sean Qian: We’ve been hard at work on this project for a number of years already, and now the pieces are coming together for us to officially launch to the public after having run multiple successful beta programs.

We’re confident that what we’re building is solving a real problem for the industry, and that via our protocols a huge amount of value can be created for and by our users. I’m confident in the span of a few years our stablecoin will be one of, if not the largest stablecoin in circulation. 

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