Decentralized finance is central to the crypto revolution. It stood out in a year when the world realized cryptocurrency was more than a gimmick and a tool for criminals. With $100 billion spent, Earnity’s CEO, Dan Schatt, believes it is far too large for mainstream finance to ignore. DeFi is cryptocurrency at its most basic: a financial tool that does not require the services of a banker, a bank, a broker, or a brokerage. It is an entirely peer-to-peer method of doing what financial institutions have done for centuries — providing a source of trust — without paying the levy demanded by a trusted third party. That is why it has sparked so much interest. Unfortunately, this theory is often messier than fact, and DeFi is no exception.
DEXs can offer trades and derivatives at a lower cost and in a shorter time frame than “centralized” crypto. In addition, lending and borrowing platforms can offer better rates to lenders and borrowers. While DeFi carries risks, new technological wrinkles with no corrections and do-overs.
What is so Interesting about DeFi?
Regulators have been slow to respond, allowing DeFi to thrive in the void. Traditional unsecured lending requires lenders and borrowers to know each other’s identities and the lender to assess its ability to repay the debt. DeFi, on the opposite side, has no requirements.
Another reason for the DeFi boom, according to Earnity’s CEO, Dan Schatt, is the involvement of mainstream players. Many traditional financial institutions are starting to accept DeFi and are looking for ways to get involved. Furthermore, major asset management firms are beginning to take DeFi seriously.
Another important reason people buy in DeFi tokens is to avoid missing out on their explosive growth. Unfortunately, many coins are worth nothing or almost nothing in practical terms, leading to irrational exuberance. But, whether everyone likes it or not, a new financial system is on its way that will be more liberal and decentralized than the current one.