Elon Musk made a lot of news with the filing of his purchase of over 9% of Twitter. This caught the attention of the entire social media and financial worlds. Is Elon going to decentralize it or what he is going to do?
This clouded over another important announcement by one of his companies, Tesla. We know Musk makes a lot of headlines in the cryptocurrency world but for some reason this went rather unnoticed. There might be good reason for it since few seemed to pick up on it.
You would think news like this, if true, would spread through the entire crypto community like wildfire. Musk even says the word "cryptocurrency" and there are 5 articles written about it.
Nevertheless, we will delve into it since, even if not the case with Tesla, does show the future of Decentralized Finance (DeFi).
Tesla Financing Real Estate
According to The Defiant, Tesla is using MakerDAO to take out loans for real estate. This is going to be used for their service centers.
6s Capital closed a deal with Tesla for $7.8 million. This is all a bit suspicious since Musk didn't make mention of it. Of course, in his realm, $7.8 million to finance a service center isn't really on his daily radar. Nevertheless, if this were something they did, you would think he would be out pounding his chest.
A Tweet did appear from MakerDAO's pseudo-anonymous Co0Founder.
The idea is to use this to build new service centers. Tesla is sitting on close to $2 billion worth of Bitcoin. We could see this as a new way to tap into capital which would allow them to finance expansion.
Of course, if true, this would be enormous. Here we would see another step in the evolution of cryptocurrency as a financial ecosystem. Tapping into the value of existing assets is one of the major promises of cryptocurrency.
One of the main concepts is that banking system is going to be under threat. There is little doubt that digital wallets really are going to hinder deposits at some point in the future. At the same time, DeFi has the potential to radically alter how people access money. This will include institutions including Tesla.
Hence, this type of deal does make sense, even if it is an April Fool's joke or a ploy for attention.
Trillions In Real World Assets
People really do not realize how big a market we are talking about. There are a couple hundred trillion in real world assets out there. Much of this is untapped since it is non-liquid, over regulated, and very difficult to deal with. The digital age makes things much quicker and more efficient.
The challenge for DeFi is the lack of liquidity. This is obvious since it is a rather newer realm. The existing financial system grow over 150 years, with returns only generating more capital. DeFi is basically in its 3rd year.
At this point, something like this could hold appeal for a company such as Tesla since the deal would not show up as debt on its balance sheet. It would effectively go under an operating expense since the deal would be paid akin to rent. This is much different than accessing the traditional capital markets to raise money including going through the banking system.
Here is where we can see the ongoing values of cryptocurrency becoming a vital component to growth. Through collateralized lending, we can see how the financing of real world activities will lead to wealth generation. It is a transformation that the industry really needs to take.
Ultimately, there will likely be a day when some very big players enter this realm. After all, the bankers are not going to sit back and willingly give up their share of the financial market. Of course, they didn't do that with mortgages yet FinTech companies were able to wrestle most of that market share away.
We are at a time of major transformation. Perhaps Musk and Tesla pulled off another step in the massive evolution that is taking place. Or, maybe, this is a total fabrication. Either way, it does provide insight into the future.
Accumulation Of Assets
This is showing the importance of accumulating assets. The industry is still in its early stages and, while it is true we are not talking in billions like Tesla does, we can follow the same concept.
Putting value to work is one way to expand things quickly. It also creates a feedback loop whereby the value of our assets increases as more activity takes place. When those assets are dormant, we can see how it is a lost opportunity. Right now the Bitcoin on Tesla's balance sheet is simply sitting there. Sure, it can go up in value along with the market. However, if they could put it to use while still retaining it, that would provide a much larger financial benefit.
This is the basic idea behind economic expansion. Debt is viewed as a bad thing by most people probably since their use of it is for credit cards and car loans. That is only going to get one further behind. Of course, step back and look at things from the other side. Both of those are extremely profitable for the lenders.
At this point, we are very early in the game. We are going to see a lot of experimentation taking place. The interesting aspect is the ability to "create money". We will see how platforms incorporate this concept into their operations. It really does open the door to a great deal.
In the meantime, just keep filling the bags. Whatever the token, keep an eye on its value. As things are built out, this could end up being included in some lending platforms that help to grow things quickly.
Essentially we are going to have to generate trillions of dollars in liquidity. Some of this can come from money brought into the system. This is how Wall Street thinks. However, the other way is to use our ingenuity by utilizing some of the core concepts of cryptocurrency. The key will be to do this on a small scale, many times over. That is how we grow.
Fly under the radar until we are so large things cannot be stopped.
Most do not need a loan for $7.8 million. However, we can easily see how 1,000 people could use $7,800. This is even better if they are taking it out against their own assets.
We are getting to the point where options that were once only available to the biggest players, i.e. major corporations and Wall Street, is now available to all of us.
Whether Tesla stepped up to help change the game is debatable in this instance. What is not is the fact the game is changing.
And we all have a front row seat.
So what are your thoughts on this? Do you think Tesla actually did this or is this a ruse?
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