After a few weeks of looking at bitcoin and its emergence as an investment asset, let’s look at the works of what is called ‘decentralised finance’, DeFi for short.
This is a very good guide written a little over one year ago on what new financial products are being created on the Ethereum and other blockchains. It’s a longish article but very readable:
The article examines the following:
~ ‘Stable’coins
~ Decentralised lending
~ Decentralised exchanges
~ Decentralised identity
~ Collateral (for lending)
~ Composability (ability to combine the above services into a ‘pipeline’)
As the writer says, while the goal starts out to
recreate traditional financial systems (such as lending, borrowing, derivatives, and exchange) with automation in place of middlemen
Because these are run via code (usually what are called ‘smart contracts’),
Once fully automated, the financial building blocks of DeFi can be composed to produce more complex capabilities.
Ultimately this is what makes DeFi so exciting. Unencumbered by limitations of human-speed processes and centralised systems, these systems that run on code can be made faster, more capable and yet more accessible to people like you and me.
Maybe over the next few days we’ll look into some of these.