Tim Frost, CEO at YIELD App, which is a comprehensive Fintech app offering a wide range of DeFi services and new investment strategies, has shared his views and insights regarding the recent trading frenzy that was initiated by a group of armchair investors via Reddit and other social media channels.
Frost also discussed how financial inclusion, financial literacy and other key digital financial services are needed. He pointed out that there are well over a billion unbanked people in the world, which presents a major opportunity for Fintechs to capitalize on by offering more accessible, truly decentralized, censorship-resistant, and arguably superior financial services. Frost touched on many other topics as well.
Our discussion is shared below.
Crowdfund Insider: Stablecoins have become a widely-used form of settling transactions in the crypto-assets space. The stablecoin market is now worth billions with growth accelerating rapidly during the past year. Where do you expect this sector to be in the coming years in terms of overall growth and adoption?
Tim Frost: The most important aspect of algorithmic stablecoins is that they represent an exciting, creative experiment that’s totally decentralized, voluntary, censorship-resistant, and fair (i.e. no pre-mining of tokens).
Earlier this year, US regulators approved for banks to use stablecoins that connect to the blockchain. Now with this legal barrier removed, this paves the way for the use of lending digital currencies like USDC as mainstream payment and helps put the US in a leadership position that embraces blockchain. This is huge for DeFi because USDC has a current market cap of over $4 billion with a large part of that already deployed on dApps.
Although they do face far too much volatility at the moment to replace USDC or DAI, it will be interesting to watch them develop and, hopefully, stabilize.
Crowdfund Insider: The YIELD App just launched with support for USDT, USDC, YLD tokens. What would be the main use cases for the YLD token?
Tim Frost: YLD tokens have two primary functions for the end-user:
Users receive up to a 10% APY boost on their investment by holding YLD tokens in the app, earned in YLD. Users without YLD tokens still receive a 2% APY boost, earned in YLD.
YLD tokens generate up to a 10% annualized holding reward, paid daily in YLD. By holding a certain amount of YLD in their YIELD App wallet, users unlock daily rewards. You can read more about the token here.
Crowdfund Insider: What are some of the main use cases for DeFi that you see emerging in the long-term?
Do you feel the industry has matured a lot in the past year? What were some key factors that have led to the rise of decentralized finance?
Tim Frost: One of the biggest news developments this year has been the incredible rise of GameStop’s stock (GME), driven by a loose collective of armchair investors who beat multi-billion dollar hedge funds at their own game.
It’s important to note that a large number of WSB members use the popular trading app Robinhood, a company that has proclaimed itself a leader in democratizing finance to “let the people trade.” On January 28, Robinhood inexplicably halted buys of GME and other stocks like AMC and Nokia. As expected, GME’s price immediately crashed as Robinhood users could only sell GME while institutional investors were free to do what they liked. Naturally, this caused immediate outrage, as the measure was neither properly justified nor explained until sometime after the event and was put down to a collateral request from the National Securities Clearing House.
The events that have transpired emphasize how powerful communities can be when they’re organized and committed. WSB’s simple goal of making money united them and managed to send some of the most powerful firms in Wall Street reeling. All it took was a little bit of analysis and a lot of dedication. Of course, WSB never set out with the intent of igniting a revolution, but they have shown that an online community can beat the institutions that have been taking advantage of them for decades.
Anyone who’s been in crypto long enough understands the power of community. Without early adopters, supporters and participants of the Bitcoin network, it never would’ve taken off, and we wouldn’t be in a position to talk about decentralized financial tools that democratize money.
DeFi empowers people by allowing them to opt-out of the systems that have historically excluded them, giving them access to conventional financial tools that have been deconstructed and rebuilt from the ground up. All of this requires new technology, networks and users. We think there’s a huge opportunity for end-users to participate in DeFi and earn high returns while avoiding unnecessary risks.
These recent incidents have truly highlighted the need for decentralized infrastructures and systems, a system where anyone can participate, no one can be censored, and markets can’t arbitrarily close. It replaces irksome referees with impartial robots.
Crowdfund Insider: With interest rates near or at zero, and even potentially becoming negative in the traditional financial sector, do you see DeFi and its high-interest rates having a competitive advantage over traditional financial services?
Tim Frost: The economic disruption of COVID-19 is also highlighting the importance of serving people who are currently outside the financial system, both in developing and developed economies. For instance, at present, there are 1.7 billion unbanked individuals worldwide, according to the World Bank. The Federal Deposit Insurance Corporation estimates that in 2018, over 6% of US households were unbanked and 16% were underbanked. Even for those who are in the banking system, 40% would have difficulty covering an unexpected expense of $400.
With anxiety at an all-time high, consumers and businesses are looking to banks and credit unions for financial relief, access to government aid, and guidance on how to cope with the ongoing economic storm. Institutions are failing and unfortunately, the systems put in place to protect us— healthcare, testing, protective equipment, and supply chains — have crumbled from poor leadership and delayed reactions. And just like in 2008, consumers look to technology for solutions.
This represents a massive opportunity for Fintech today and moreover, decentralized finance (DeFi) as it provides access to financial services to most of the population. The hot new cryptocurrency trend of 2020, DeFi cuts down intermediaries like banks, which also makes transactions faster.
Loans on such platforms have risen more than seven-fold since March to over $3.7 billion, according to industry site DeFi Pulse. During a time when the central banks are slashing interest rates with a benchmark rate sitting close to zero, investors are on the hunt for new returns and ready to explore DeFi
Crowdfund Insider You had mentioned that your firm is getting ready for its public launch, and YIELD App will begin rolling out its full range of banking and wealth management services for crypto and mainstream users.
YIELD App’s plans include new portfolio funds (including BTC and ETH), fiat ramps, and card services. This is a very comprehensive range of services.
Are you planning to offer an all-in-one “super app” type solution?
Tim Frost: Yes, we’re planning to offer an all-in-one “super app” type of solution.
YIELD App has ambitions to pioneer mass adoption of DeFi thanks to an innovative yet proven range of services, with the goal of including the excluded, facilitating broader crypto awareness, and providing educational opportunities through its governance foundation. YIELD App is positioned to create enough value to keep all stakeholders engaged and committed to fulfilling the company’s mission, purpose, and vision (which intends to demonstrate the wider societal benefits of decentralized markets and promote financial literacy).
To maximize investment returns in DeFi, a deep understanding of multiple applications and smart contracts is needed when dealing with liquidity mining, staking, and decentralized lending schemes. This results not only in increased complexity for players seeking to achieve above-market-average yields, but it also implies high gas fees that may render otherwise attractive strategies cost-ineffective.
YIELD App, as an Institutional agent, is convinced that it can successfully fulfill this market need by routing the aggregate capital of many individuals into actively managed portfolios to provide its users with otherwise unattainable results. This allows us to create profitable returns on assets invested and significantly mitigate risks inherent to DeFi that are unmanageable for a single passive investor.