Billionaire investor Mark Cuban is very bullish on the future of DeFi, or decentralized finance, and DAOs, or decentralized autonomous organizations.
“There are a lot of financial institutions that should be concerned,” Cuban wrote in a blog post on Sunday. For one, “banks should be scared,” he wrote.
DeFi applications aim to recreate traditional financial systems with cryptocurrency, while DAOs can govern and oversee DeFi applications and other projects.
DAOs are similar to traditional corporations or organizations, but instead, control within DAOs is democratized. Rather than having one centralized leader, DAOs have members that vote on decisions and rules, which are then coded into smart contracts on the blockchain.
For example, through DeFi lending, users can lend out cryptocurrency like a traditional bank does with fiat currency and earn interest as a lender. DeFi lending applications, like Aave, Compound and Maker, are governed by DAOs.
The structure of these decentralized protocols is one of the things that draws Cuban’s interest and makes him think that DeFi could be a serious competitor to traditional banks.
He uses Aave as an example to explain why. (Cuban, a star of “Shark Tank” and owner of the NBA’s Dallas Mavericks, has invested in Aave, which he disclosed during a Reddit “Ask Me Anything” in February.)
“Aave, like its competitor Compound, looks like a bank. But, it is not. Nowhere close,” Cuban said. “Aave is a completely automated, permissionless platform, where there are no bankers, no buildings, no toasters, no vaults, no cash, no holding your money,