Why decentralized finance may (or may not) make Crypto relevant
Censorship resistant. Giving monetary freedom back to the people. These are a few of the promises Blockchain and Crypto die-hards usually preach when discussing this nascent asset class.
Unfortunately, Cryptocurrency has been viewed as a speculative asset class at best and a scam that lacks legitimacy at its worse.
The price of Bitcoin has been far from stable, no Blockchain project has achieved a commercial level of scalability without sacrificing decentralization, and you here of multiple thefts and hacks frequently.
These and more factors have led many to question whether Blockchain and Cryptocurrency is a “failed experiment” that will never deliver on its promise of bringing decentralization to the masses.
Enter Decentralized Finance (DeFi).
Don’t get me wrong, DeFi is by no means the savior of the Cryptocurrency and Blockchain industry. It is far from the finished product and contains inherent risks, some of which threaten its viability.
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The aim of this article is to provide an extra perspective on a section in our recent (and upcoming) EU H2020 grant…
Today I want to make the case for why DeFi brings newfound hope to the industry at a time when development seems to be stagnating, with potential breakthroughs still in the making.
Read on and let me know what you think!
Combining The Old With The New
Since mankind started making transactions with each other, the concept of finance has been a concept has constantly evolved. From carrying out barter trade to trading derivatives, change has been the only constant when it comes to the topic finance.
Decentralized finance does not reinvent the wheel of financial concepts. It merely adds a technological layer to it and removes the middle man in most cases.
Am I oversimplifying things? To a certain extent, I am probably making DeFi sound more simple than it is.
However, on the macro level, we have to remember that concepts such as peer to peer lending, prediction markets, and fundraising are not concepts that are newly introduced into the market.
This is seen in how DeFi is arguably the most widely adopted Blockchain application thus far, with almost $700 million of ETH held in DeFi as recently as this year.
Making profits is a huge motivator for new entrants in the market to learn about DeFi and make the leap. Much more than the promise of decentralization and censorship-resistant money. Furthermore, DeFi is not limited to retail investors.