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Originally released On: 22 FEB 2021 via Forbes (Link below)  by Philipp Sandner.

 

Rehash: Decentralised Finance Will Change Your Understanding Of Financial Systems

 

Decentralized Finance (DeFi) is likely to have a significant impact on how banks operate in the future – and even has the potential to shift the structure of the whole financial system at a macroeconomic level. However, before we discuss and substantiate this hypothesis, we would first like to introduce the core concept of DeFi.

Decentralized Finance or “DeFi” in short, is an umbrella term encompassing the vision of a financial system that functions without any intermediaries, such as banks, insurances or clearinghouses, and is operated just by the power of smart contracts. DeFi applications strive to fulfil traditional finance services (also coined as Centralized Finance, or just CeFi) – but in an entirely permissionless, global and transparent manner.

Check here to access the full article. Where the following is covered:

  • Commercial banks

  • Investment banks and issuers of financial instruments

  • Exchanges

  • Insurances

  • Central Banks

  • and the Three maturity stages of a decentralized finance system

  • Stage 1: Efficient value transfers

  • Stage 2: Connecting savers and borrowers

  • Stage 3: Competing for traditional finance funds

Conclusion: Crypto-based finance is here to stay

For the first time in history, a financial system is developing without intermediaries at a large scale. So far, DeFi applications cannot compete in terms of security, speed, and ease of use with traditional finance solutions yet. But DeFi has produced real, working applications that have already managed to attract billions of capital. Those resources will be used to develop more competitive and user-friendly applications in the future.

Yes, there are parallels to the ICO hype of 2017, which resulted in a sharp increase and price crash across virtually all cryptocurrencies in 2018. Since then, the interest in mainstream media has diminished. However, it has been largely unnoticed that the influx of capital through ICOs has enabled the blockchain community to bring the technology to the next evolutionary stage. Now again, large sums are invested into blockchain technology. But in contrast to 2018, applications already have been developed and are running. So while we might be standing on the verge of a new bubble, we might also be at the beginning of a new big development cycle for blockchain technology.

    Click to read the full article here.

     

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