This Could Be Crypto's Next Evolution - Beyond DeFi 🚀

[00:01] And when I started digging, it turned out to be way more interesting than what with you. Here's the observation. If I look at how my portfolio is structured, some staking, maybe a liquidity pool, maybe a position in Hyperland or Aave.

[00:17] lazy, but because there's never been a reason to actually look outside that class that's been existing for more than 20 years, processed tens of billions of dollars, and that's been practically invisible to us. And that is crowd

[00:32] it's been opening up to crypto. Crowd lending literally means collective lending. A group of investors pool capital together and finance a loan to a real business through an online platform. The bank as middleman is

[00:45] removed. The key part in crowd lending, you are a lender, not a co-owner. No equity, no dependence on valuation. What you have is a loan with fixed terms, a rate, a term, and a collateral. One useful distinction for us, in DeFi, the

[01:00] collateral is another crypto. When the market drops, it auto liquidates in order to maintain the collateral value. In crowd lending, the collateral is physical. Its value isn't tied to the crypto market at all, making it more

[01:12] let's talk about what this is not about. All right, so what isn't crowd lending? It's not crowdfunding. On Kickstarter, with interest. It's not venture capital because you're not buying equity. It's

[01:24] not staking. Your yield isn't paid by token emissions. It's paid by a real business out of its revenue. And it is not a DeFi protocol. The borrower is a specific company with an address, financials, and physical assets. Much

[01:37] more stable than just a DeFi protocol that is obviously more exposed to crypto. Here, it's a real-world business, as I mentioned before, with their financials, physical address, etc., etc. One more thing on maturity.

[01:49] This market started back in 2005 with Zopa in the UK, developed for almost 20 years independently of crypto. And since November 2023, the EU has had a November 2023, the EU has had a mandatory license called ECSPR, same

[02:02] regulatory checks as traditional finance. This isn't just some random crypto experiment. There is regulatory clarity as well. Now that we know what differentiate between two formats and the difference matters for you. All

[02:15] peer-to-peer, the classic format. One person lends to another person through a platform. Same mechanics as lending to a friend, but scaled and with an automated scoring. Yields runs 10 to 14%. Terms are short, three to four months. The

[02:28] structural problem is usually there's no collateral. If the borrower was to stop recover. For us specifically, peer-to-peer is less interesting because of this reason. A well-known player here is Bondora from Estonia, 2009, 200,000

[02:42] investors, one of the oldest active platforms in Europe. Next, we have interesting one. Peer-to-business is basically lending to small and medium companies with collateral against real assets, equipment, fleets, inventory,

[02:57] commercial real estate. Yields are 14 up to 25% and not because borrowers are riskier, actually the opposite. A business with financials and physical assets is more analyzable than just an individual. The higher rate reflects

[03:09] more on complex loan structuring, not worse credit. So why does a business pay 14 up to 25% instead of just going to a bank? Because a bank reviews an SMB application for two to six months, demands a huge documentation package and

[03:21] often refuses. Crowd lending platform answers in two to four weeks. The business here is paying for speed and accessibility, not a sign of a problem borrower. Peer-to-business directly intersects in the RWA narrative. A real

[03:33] physical asset legally structured as collateral doesn't lose value when the crypto market does. So what are the major web two players in crowd lending? Mintos from Latvia, 2015, the largest in Europe by volume, over 10 billion euros

[03:46] in loans, 30 plus countries, regulated as a EU investment company. Bondora, Estonia, 2009, the P2P player I mentioned before. Mayclear, Switzerland. P2P business on real-world assets as collateral as well. European market

[03:59] only. The point Mintos and Bondora aren't startups. They've been running longer than most DeFi protocols, survived multiple crisis, and they're still here. The Web3 crowdlending ecosystem is being built on top of this,

[04:11] not from nothing. Let's put this side by side with what we actually use. I'm not just different things with different risk profiles. Their source of income skip. Staking pays you in token emission. LPs pay fees plus emissions.

[04:26] DeFi lending pays from another crypto borrower. Peer-to-business crowdlending pays from actual revenue from a real business. So, nominal yields for staking are 3 up to 12%. LPs anywhere from 5 to 80% APY. DeFi lending 2 up to 10%.

[04:39] 80% APY. DeFi lending 2 up to 10%. Peer-to-business 40 up to 25% in USDC. the numbers. Gap between nominal and real yield. 12% APR in your token and 12% APR in USD C are not the same. 40% in value while you are getting a 12%

[04:53] APY, your real return is negative. That's not a critique, that's just the reality of it. In crowdlending, the rate is fixed in a smart contract the moment predictable one. All right, so, the honest downsides because I'm not going

[05:07] to be wrapping this in a bow. Liquidity is the main one. Funds are locked for the long term, 4 to 16 months. Secondary markets exist, but speed and price you're sure you won't need. Credit risk is real. A specific business may

[05:20] default. Collateral and buyback reduce the risk, but it doesn't fully eliminate Diversification across loans isn't just a recommendation, it's a structural requirement. And smart contracts get audited, but no Web3 protocol is 100%

[05:33] guaranteed to have no risk. This isn't a trading instrument. No volatility, no psychological profile, definitely. All right, so, let's zoom out for a second. talking about here. It's not a fringe idea. It's where the largest pools of

[05:46] money in the world are moving. December 2024, Blackrock, 11 and 1/2 trillion with a T dollars under management, the biggest asset manager on the planet, agreed to acquire HPS Investment Partners for $12 billion. The goal,

[05:59] build a combined platform with $220 billion in private credit. It was the third major acquisition in 2024, all aimed at private markets. Blackrock is a name our audience knows. They launched the Bitcoin ETF. iShares is basically

[06:13] the gate of institutional money into crypto. So, this isn't just an abstract institutional investor, it's a concrete reference point. Larry Fink has publicly said private credit is the future and they expect the market to grow up to

[06:26] $4.5 trillion in 2030, almost double current levels. Private credit at the institutional level is the same logic as crowd lending, just obviously at a different scale. Funds enter through private deals from $50 million up. Crowd

[06:39] lending make the same mechanics available from $50. When Blackrock puts 12 billion in a private credit deal, that's not a go buy this signal. It's a signal that this asset class is going mainstream faster than it might have

[06:52] looked like inside crypto. Most crypto capital today circulates inside the economy receives almost nothing from this. According to World Bank data, the this. According to World Bank data, the global financing gap for SMBs is over $5

[07:05] trillion per year. Banks are just too slow or structurally unstable to close all of that demand. Web3 infrastructure opens up a new possibility. An investor anywhere in the world can directly finance a business in Europe through a

[07:18] smart contract without bank intermediaries. That is essentially a structural change in how capital moves. Crypto gets criticized from being lending is one of those use cases where crypto can actually be solved to solve

[07:31] an actual financial problem in the real world for a real business, not to third question, if the model is so strong, why are there so many Web3 crowd lending projects? It's one of the least represented sectors in crypto. Well, not

[07:44] because the model is weak, but because the execution is hard. A working product analysis of real businesses, legal jurisdictions, smart contract infrastructure, and EU regulatory

[07:58] four of them at the same time, maybe two. Web 2 crowd lending has already validated the idea that this works and it has processed tens of billions of euros already. Web 3 is just starting this journey. Let me show you a project

[08:12] that's actually doing this. The platform is Eight Lands. The reason I picked it is the background. Behind Eight Lands is MacClear, that Swiss P2P company I mentioned. Real track record, operated for years in the European market, but

[08:25] EUR and SEPA only. Eight Lands is the web 3 expansion of the same model, USDC base, Coinbase's layer 2. It's an absolute rocket of a blockchain to build in, open-source smart contracts with independent audits. The platform just

[08:38] celebrated its first year. Not a white paper. Real loans, real payments, real borrowers. And MacClear acts as a collateral agent. Legally, they hold the collateral on behalf of investors and handle liquidation if there's default.

[08:51] the company, country, industry, collateral, rating from triple A to D, rate, and term. Specific businesses with names and addresses. Open a card and you documents, collateral valuation, financial metrics, all public, nothing

[09:05] on chain. Open the explorer, see the transaction yourself. There's also a mobile app. Portfolio, active loans, payment history. On protection, investor funds sit in a smart contract. Platform doesn't have direct access. MacClear

[09:18] holds collateral as a Swiss legal entity. On default, two paths: buyback principal plus interest, or liquidation of physical collateral. Links in the look yourself, see how it works, no obligation. KYC is 7 to 15 minutes if

[09:32] this video, I just I mention crypto has gone through several phases. Digital money, the programmable contracts, then a long stretch of speculation inside its own ecosystem without any real world use cases or bridges between TradFi and

[09:46] crypto or just the real world. What's starting to take shape now is the next phase. Blockchain as an infrastructure for real financial relationships outside crypto. RWA, crowd lending, tokenization, different expressions of

[09:58] the same direction. If this plays out the way it currently looks, crypto stops becomes the infrastructure for the real economy. That's a different conversation of why crypto exists after all. I'm only digging into this myself. If you're

[10:10] read a borrower card, how to build a portfolio, how the secondary market you want me to go deeper into the rabbit hole. Thanks for watching, guys, and I hole. Thanks for watching, guys, and I will catch you in the next video.