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What is DeFi? Decentralised Finance research short film by Dinis Guarda

Dinis Guarda
11th January 2021

What is DeFi? by Dinis Guarda

Summary

  1. What is #DeFi

  2. Centralised vs Decentralised Finance

  3. Challenges of decentralised Finance

  4. Opportunities of decentralised Finance

    1. The DeFi Market Size and the growth
  5. Top DeFi solutions

  6. Top DeFi tokens

  7. The Future of Crypto and Finance

  8. What is DeFi

DeFi is a tech decentralised open-source system that allows for code smart contract driven strategems to use every traditional financial - society activities such as banking, lending, borrowing, supply chain, structuring derivative products and the buying and selling of securities, to be made through digital #blockchain nodes networks without the need for middlemen.

Decentralised Finance (DeFi) aims to recreate the traditional financial system with fewer frictions, limiting the interactions of middlemen such as banks.

The 4 Primary Features of DeFi?

  1. Permissionless:
    A DeFi system’s foundation blockchains are permissionless ones – which allows anyone to access the applications on a DeFi protocol and trade over the network without requiring anybody to sanction it.

  2. Open Source and Transparent:
    The code is visible to every user, allowing everyone on the network to audit it and verify its security + functions.

This transparency of the network doesn’t tamper with the users’ privacy either, since all users are identified by their digital signatures (like a social media username).
Open-source coding ensures DeFi’s credibility.

  1. Interoperability:
    DeFi is very easily compatible with the integration of other applications, so DeFi always has the scope to expand further, offer new financial services, or develop new financial marketplaces.

  2. Accessibility:
    Anyone with a computer/smartphone and a decent internet connection from any corner of the world can join a DeFi network.

DeFi are based on Synthetics
a financial instrument or product that is meant to simulate other financial instruments while altering their key characteristics.

The functionality of a financial instrument can be achieved through a blend of different financial instruments.

The vast majority of DeFi systems are currently created using blockchain platforms with smart contract capabilities such as Ethereum, but other platforms could also be served as base.

  1. Centralised vs Decentralised Finance
    In centralized organizations, primary decisions are made by the person or persons at the top of the organization.

Decentralized organizations delegate decision-making authority throughout code & the organization.
Advantages of decentralized organizations include
increased expertise at each division, quicker decisions,
better use of time at top management levels, and increased motivation of community.

DeFi solutions being developed will have an increasing significant impact on the financial industry & society.

  1. Challenges of decentralised Finance
    Some of the most prominent risks present in the DeFi field come from
    issues with tech smart contracts, cybersecurity, governance, user error, market volatility, lack of insurance on loans & potential failure of the price mechanism.

DeFi needs strong governance entities, as otherwise it can become unclear who should be held accountable for potential wrongdoings or failures.

When problems arise, DeFi needs certified governance parties that can take actions to freeze transactions, fix problems,

  • restore normal operations.
  1. Opportunities of decentralised Finance

Decentralized platforms facilitate combinatorial innovation.

In a DeFi ecosystem, technologies are building blocks for solutions, promoting new combinations + products for communities.

Combinatorial DeFi platforms innovation is made possible by permissionless innovation and open sourcing smart contracts AI driven platforms.

DeFi applications and platforms—such as Bitcoin, Ethereum, and — share
their core technologies through permissive open-source licensing,

allowing anybody to make use of their core technologies as well as to build new applications on top of them

  1. The DeFi Market Size and the growth

2020 Was the Year of DeFi

The figure, which represents the dollar value of assets locked in DeFi protocols, closed out the year above $13 billion, demonstrating 2,000% growth since January

The DeFi tokens market is growing exponentually

$29.394B
the DeFi Tokens by Market Capitalization

  1. Top DeFi Platforms case studies

Decentralized finance (DeFi) has witnessed staggering growth in 2020.
2021 will be much bigger
There is now more than $26.7+ billion locked in Ethereum DeFi platforms.
DeFi platforms have more than 500,000 users.

DeFi biggest sectors so far:

  1. Trading and Marketplaces
  2. DEXes/ Decentralized Exchanges
  3. DeFi derivatives
  4. Tokenization
  5. Stablecoins
  6. Synthetic Assets
  7. Lending and Borrowing:
  8. Asset Management
  9. Insurance
  10. DAOs/ Decentralized Autonomous Organizations
  11. Payments
  12. Decentralized Marketplaces
  13. Identity
  14. Gaming

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