One question I often encounter on twitter or in real life is: What are the use cases for defi? People love to say many things: money markets, NFTs, speculation, and tokenized real estate to name a few. Most of these are untested or unpredictable. LandX offers an intriguing value proposition — real farmland and the commodities grow on them (currently planning to offer Rice, Corn, Soy, and Wheat) as a different source of predictable yield and funding. All of this available through the Ethereum network (or rollups in the future).
I recently tried out their test network to get an idea how it worked from a n app perspective.
The first token offered on the site was the capability to exchange stablecoin (USDC) for a tokenized version of a commodity (see below).
That tokenized commodity can then be staked on the LandX website can be staked on the website in exchange for a yield equivalent to the market value of 1 kg of the product.
An alternative offering is to get exposure to the xBASKET token, which offers exposure to an index of the commodity tokens.
I think this is interesting, as it is “yield farming” in a real sense since the platform purports to own land which these crops grow on. That’s a differentiator from other yield in defi, which is usually based off speculative future value of a network/token. This could be a way to give defi-native app users other ways to hedge market volatility besides sitting in low interest stablecoin vaults or chasing alpha.
According to the USDA, “Agriculture, food, and related industries contributed $1.055 trillion to the U.S. gross domestic product (GDP) in 2020, a 5.0-percent share. The output of America’s farms contributed $134.7 billion of this sum — about 0.6 percent of GDP”. These are big numbers, and certain trends — climate change, de-globalization, and energy supply and food crunches caused by the Russia-Ukraine conflict all point towards higher demand for food products. This will be inflationary for both food and farmland costs. If real yield for treasuries continue to go up, and liquidity leaves risk assets, I could see demand being high amongst on-chain institutional level investors for a different type of yield like LandX offers.
Some areas of future interest for products like LandX could be staking the index for a ctoken of the entire basket of commodities. This same type of protocol could be expanded to oil wells and mining as well.
The main concern I have for LandX is product validation — how will they drive and verify demand? I’d be curious who the ideal end user is for a product like LandX — documentation says institutional investors, but I bet their could be more than that interested in a product like this. I’d ideally like to see some link to their physical farmland, or an example of the validator (the person who finds farmland owners interested in working with LandX) in future faqs.
Another concern I have for LandX is that they might be opting for the Ethereum mainnet v. using Matic or another Layer 2. This can certainly effect costs like gas fees, and make it hard to use a platform during high demand.
Overall I am excited by their ideas, and wish them luck in execution!
