More will benefit from a system that is global and composable MakerDAO, Frax, Aave and Circle are converging to build the future of banking. This article will describe the emerging architecture. It is being driven by historically wide interest rate spreads. Now we can fit these pieces together to expand the supply of savings and credit. DeFi banks will reach more savers and builders Banks handle $100T in assets…

Linking savers with a universe of loans and investments US banks reported $279B in profits for 2021. They earned this money with “waterfalls” that convert unstable investments into stable deposits. In a waterfall, a banker agrees to absorb losses in exchange for taking any extra profit. In DeFi terms, the banker puts in extra collateral to cover losses. This…

What happens when everyone wants their money back? DeFi brings us new tools to handle a 400-year old problem. In a “financial panic” everyone wants their money back at the same time. Photo by Jeremy Bishop on Unsplash Summary DeFi handles surges in money demand with three tools: Variable interest rates Flexible pricing. Not fighting too hard to hold…