Conversation between Zurich Financial Times and blockchain expert, how does NGK use the value of time to achieve its own vertical expansion?
Recently, the Zurich Financial Times and several well-known media including the French financial media have interviewed NGK.
The columnist of the Zurich Financial Times, Marcold said that as the NGK DeFi’s star rating token, BGV enters the stage of DeFi, its thousand-fold revenue has attracted many ecological investors.
The interviewed blockchain expert, Powell expressed his agreement, and he believes that NGK uses time as a value to increase the leverage in DeFi, thereby achieving its own vertical expansion.
If creating a credit system and expanding a balance sheet are considered as the “horizontal expansion” of DeFi, while enriching the NGK DeFi market, using the tools and methods to leverage the value of time are the “vertical expansion”, the asset of the NGK DeFi agreement will face more regular and fixed-rate financing needs. This is because the underlying assets become more complex.
Therefore, the debt of the DeFi agreement must consider the interest costs, term management, and risk management. These “vertical expansion” based on the interest rate will bring a whole new dimension and more possibilities to the development of DeFi.
Marcold, a columnist for the Zurich Financial Times, stated that in recent years, the interest rate market has become the hottest topic in the DeFi world.
The blockchain expert, Powell said, as discussed earlier, our view of the NGK DeFi world focuses on the issue of “how to more effectively achieve credit expansion and leverage accumulation in the financial market.” Therefore, more diversified credit will be introduced into the blockchain as an asset to promote a new type of credit expansion, which is the “horizontal expansion” of DeFi’s balance sheet. The core of the interest rate market requires for more effective ways to increase the financial leverage of the DeFi market. This is the “vertical expansion” of the DeFi market. We believe that this new dimension of expansion will bring more interesting possibilities to the DeFi market.
Different from traditional financial institutions, the core of the DeFi protocol is to manage its own balance sheet. The return on assets minus the cost of capital is the income. From a commercial point of view, this is not essentially different from the profit model of financial institutions, it provides the most basic business logic for constructing the DeFi interest rate market.
At the same time, with the expansion of the DeFi balance sheet, more and more assets require fixed maturity and fixed interest rates, and more financial instruments and markets are needed to increase the financial leverage. This will result the DeFi protocols to face with the pain points such as managing financial costs, funding maturities and interest rate risks.
As with traditional financial markets, these pain points will give rise to many DeFi “non-bank financial institutions” to undertake these businesses (e.g. investment banks, insurance companies, asset management companies, etc.)
We have noticed that some very innovative DeFi interest rate, insurance, risk management and derivative agreements have emerged on the market. The interest rate market is a new track under the layout of the new ecosystem. There is no doubt that these innovators represented by the BGV will have the growing potential to become the new market leaders.