A buzzword in the 2020 crypto space, Decentralized Finance (DeFi), is an umbrella term used to describe a number of financial services and applications that operate without a centralized authority such as a bank or government. Using digital assets like tokens, smart contracts, and a blockchain such as Ethereum, participants in this ecosystem can lend out their money capturing interest, receive loans, trade cryptocurrencies and more. Without a central authority, lenders can set their own terms and count on greater interest as there is no middleman like a bank taking a percentage. Because these transactions are all taking place on a blockchain, the transactions are verifiable and can be checked at any time by those participating in the transaction.
Already, more DeFi products and applications are being developed such as insurance, prediction markets and tokenization of assets. The goal of the DeFi movement is to eliminate these middleman authority figures and provide market participants with full control over their financial transactions. A truly noble goal, but it is still early days and much of the DeFi market is currently just providing another set of assets to speculate on. Assets like SNX, YFI, COMP & AAVE have all seen dramatic rises in price in 2020 and likely will continue to garner attention as crypto goes more mainstream. It is not all speculation and it’s not all taking place on the dark web as some may expect. The DeFi ecosystem has fairly strong backing from the investor and VC community, with Bain Ventures, Andreesen Horowitz and others serving as investors in a number of products.
All in all, there is immense potential in decentralizing finance just as bitcoin serves to decentralize money. If you are considering speculating or getting involved do your research, we have included a number of resources and links below and this page will be continually updated.
Beginners Guide to DeFi – Decrypt
Primer on DeFi – Maple Leaf Capital
DeFi Advantages, Use Cases, Challenges – Binance
Twitter Thread: Impermanent Loss – 2020
DeFi Use Cases: