Building new financial systems — DeFi and the future of finance

In 2018 a group of revolutionary developers and entrepreneurs found themselves connected via a virtual platform discussing the ecosystem of financial applications that were being built with blockchain technology.

‘Global’, ‘borderless’, ‘permissionless’ were some of the words they used to define this ecosystem. They were envisioning the future of a world where finance was decentralized.

Enter DeFi. Exactly that, the concept of decentralized finance.

What is DeFi (decentralized finance)?

DeFi can be described in great detail, but for the sake of this post — let’s keep it short. Decentralized finance is an open financial ecosystem of real, working protocols and applications built on distributed networks using blockchain technology.

Is DeFi shaping the future of finance? Absolutely.

The exponential and continued growth of the DeFi ecosystem is indicative of its staying power and potential. DeFi is already servicing thousands of users, and on a daily basis, it is conducting transactions equivalent to hundreds of millions of digital assets.

The role of blockchain technology

Blockchain technology has been disrupting the finance industry since its inception and continues to do so with DeFi.

Innovators in the industry foresee the following as some of the notable changes in the blockchain and DeFi evolution:

Blockchains will not entirely eradicate the traditional methods of financing.

Initially, the systems will supplement each other and blockchains will add value by creating a real-time view of data.

Blockchains will present both private and public financial information

As the exciting evolution of Blockchain continues it is expected that there will be a shift from purely private ledgers to a gradual introduction to more public and accessible ledgers.

These public ledgers will probably include blockchains that require relevant permissions and ultimately the progression towards an entirely public blockchain that can operate in an open marketplace.

The environment regulating the technology will remain fluid (in the beginning)

The path to a decentralized finance system is new and daunting. As governments work to understand the technology and regulate it, the governing laws will be in flux.

Those willing to invest time and effort into understanding the revolutionary benefits of the technology on their financial systems, have the opportunity to be at the forefront and lead the rest of the globe into the future of finance.

DeFi’s potential and early applications

It is still early days for the DeFi world but it is already proving to have serious staying power.

A borderless financial system with the ability to level out the banking services playing field by offering an open alternative to a myriad of financial services- is very exciting for a more inclusive and prosperous future.

Early DeFi Applications are impressive and are already making an impact.

DeFi savings apps

These allow users to save their money outside of traditional institutions and are presenting plenty of creative ways for users to generate more interest by leveraging interactive protocols such as yield-farming and staking.

Popular savings dApps:

• Steakwallet is a mobile staking wallet that makes staking crypto more effortless than ever, offers multichain support, allows users to show off their NFTs, and connect across web3.
• Moola Market is democratizing access to credit and yield with a unique lending protocol that allows users to earn interest on CELO, cUSD, cEUR, and cREAL holdings.
• Pinnata helps users to earn more by offering an innovative leveraged yield farming protocol that lets users (lenders) earn incredibly high-interest rates by providing liquidity to a decentralized exchange on Celo.

Peer-to-peer lending and borrowing platforms

These platforms establish money markets and set interest rates using algorithms to connect borrowers and lenders directly. This provides more options for both sides and improves the overall reward potential.

Popular peer-to-peer lending and borrowing dApps:

• OppZo believes in democratizing financial access and connecting business owners with the capital needed to grow their businesses.
• EthicHub is a technological bridge that connects small farmers to working capital with very affordable interest rates to work their land and sell their products to direct markets.

Decentralized exchanges, also known as DEXes, are a fairly new, intriguing segment of DeFi application space.

DEXes allow users to transact using digital assets without requiring an exchange to hold their funds. Consequently, these exchanges have the potential to offer lower trading fees than their centralized counterparts.

Popular decentralized exchange apps:

• Ubeswap is a mobile-first Celo-native DEX that delivers powerful trading capabilities to end-users using the Celo protocol.

This is only the beginning of the shift towards an open and inclusive financial system. As the technology evolves, and key challenges like interoperability are addressed, we’ll see new applications develop and watch the finance industry bloom, reaching beyond borders and the walls of financial institutions to create lasting change across the globe.

Building new financial systems together

Check out the community that is building on Celo, or reach out to us at Flori — together, we can re-engineer money to unlock financial prosperity across the globe.

#finance #DeFi #dApps #future