DeFi

A comprehensive overview of the trends, technologies, important sectors, key players, problems and potential of Decentralized Finance. (Note: Data in this section last updated March 13th, 2022)

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Last updated 2 years ago

DeFi

A comprehensive overview of the trends, technologies, important sectors, key players, problems and potential of Decentralized Finance. (Note: Data in this section last updated March 13th, 2022)

This article is intended to provide a somewhat thorough introduction to DeFi for beginners. It’s almost 12K words (a 30+ minute read) and is organized into 8 parts, which are summarized below for the tl;dr crowd:

What is DeFi?: DeFi refers to a global network of computers that allow users to transact directly with other users to borrow, lend, earn interest and buy insurance without ever using (or needing) traditional intermediaries such as banks, brokers, exchanges, lawyers and / or regulators. The space is worth almost $200B and has grown over 10x in 2021.
The Problems with Centralized Finance: Our current financial system has several flaws – banks can seize our assets, deny us access and demand reams of personal data to open a checking account or take out a loan. They are also expensive, inefficient and not particularly trustworthy.
The Solution – Decentralized Finance: DeFi uses blockchain technology to fix this, creating a much more efficient system that’s open to anyone with internet access and doesn’t even require you to give your name.
What’s Different About DeFi?: Although DeFi has many of the same categories as traditional finance (e.g. banking, exchanges, borrowing and lending, insurance and derivatives) the elimination of intermediaries makes the mechanics quite different and the resulting systems are generally better, faster and much cheaper.
What’s New in DeFi?: DeFi has introduced innovative new financial products that offer triple-digit interest rates, allow multi-million dollar loans without collateral and allow anyone to start a bank, hedge fund, currency exchange or insurance company without obtaining regulatory approval.
DeFi Infrastructure: The space has also created the need for new enabling technologies such as smart contract platforms, oracles, data aggregators, decentralized storage providers and interoperability protocols (great section for pick-and-shovel investors).
The Dark Side of DeFi: The space has several problems, including extremely high fees and rampant scams that have costs users nearly $2 billion (some say this number is as high as $8 billion).
Why DeFi Will Eat Wall Street: DeFi is a truly disruptive technology that has the potential to grow 10,000x.

PreviousThe Long-Term Potential of Cryptocurrencies NextWhat is DeFi?

Last updated 2 years ago

What is DeFi?: DeFi refers to a global network of computers that allow users to transact directly with other users to borrow, lend, earn interest and buy insurance without ever using (or needing) traditional intermediaries such as banks, brokers, exchanges, lawyers and / or regulators. The space is worth almost $200B and has grown over 10x in 2021.
The Problems with Centralized Finance: Our current financial system has several flaws – banks can seize our assets, deny us access and demand reams of personal data to open a checking account or take out a loan. They are also expensive, inefficient and not particularly trustworthy.
The Solution – Decentralized Finance: DeFi uses blockchain technology to fix this, creating a much more efficient system that’s open to anyone with internet access and doesn’t even require you to give your name.
What’s Different About DeFi?: Although DeFi has many of the same categories as traditional finance (e.g. banking, exchanges, borrowing and lending, insurance and derivatives) the elimination of intermediaries makes the mechanics quite different and the resulting systems are generally better, faster and much cheaper.
What’s New in DeFi?: DeFi has introduced innovative new financial products that offer triple-digit interest rates, allow multi-million dollar loans without collateral and allow anyone to start a bank, hedge fund, currency exchange or insurance company without obtaining regulatory approval.
DeFi Infrastructure: The space has also created the need for new enabling technologies such as smart contract platforms, oracles, data aggregators, decentralized storage providers and interoperability protocols (great section for pick-and-shovel investors).
The Dark Side of DeFi: The space has several problems, including extremely high fees and rampant scams that have costs users nearly $2 billion (some say this number is as high as $8 billion).
Why DeFi Will Eat Wall Street: DeFi is a truly disruptive technology that has the potential to grow 10,000x.

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