“Finance has not even begun it’s equivalent to the printing press phase of the information revolution!”
Joey Krug, Co-Founder of Augur and Pantera
Decentralized Finance is a rapidly growing blockchain-based technology that enables financial services of the nature that is available to us in the mainstream centralized forms of transactions as Brendan Foster of Dharma put it “DeFi is a meme and a rallying cry, a global mass movement, an industry of builders, a reaction to failures in traditional finance.” We need to learn about DeFi as its growth has been tremendously enormous. As reported by the CoinGecko 2019 Quarterly Report, “the amount of ETH (Ethereum) locked into the ecosystem has grown by over 3x from ~2.9m ETH (>$500M!) in the span of one year.”
For better clarity in perspective, it is significant to draw a comparison between the current financial system which is centralized and the Decentralized Finance. According to the CoinGecko 2019 Quarterly Report (supra), nearly 1/4th of the world which amounts to around 1.7 billion remains out of access to the banking system with limited to no access to the mainstream financial services and tools. This is widely addressed by blockchain-based decentralized finance which gives access to all financial services to anyone with a mobile phone with internet-enabled on it.
As against the centralized financial system that requires a lot of capital and has therefore proved to be inefficient in terms of the money spent and the time required for completion of services, decentralized finance is way more efficient as an effective time and cost saver. Another attractive feature that DeFi offers is doing away with censorship which is a great advantage for some with bad credit history who want to start afresh.
A deeper understanding of a few of decentralized projects that are growing tremendously holding huge potential for the future is paramount.
According to a popular DeFi tracker website, DeFi Pulse, locked at $315.8 M, MakerDAO is topping the list. Arguably, Maker is the US dollar of the world currency. MakerDAO is essentially a finance application built on Ethereum that through its currency called the dai maintains a self-regulating and majorly transparent valuation of the currency solving the problem of frequent instability in cryptocurrency.
Compound is a lending platform allowing users to borrow and lend cryptocurrencies wherein one can earn compounding interest with the help of assets that go in the compound’s Liquidity pool. Based on an entirely decentralized system the platform cuts of the need for the middleman thus making one’s experience smooth and of a top-notch quality allowing earnings at incredibly high rates of interest!
Set Protocol/ Token sets
Set Protocol is a tool for one to manage their assets for their cryptocurrencies enabling asset management obviously in a decentralized style so the individual has personal custody of their funds free from censorship. The protocol helps one to manage investment and trading strategies in a very transparent manner. As one invests in a token, one is fully aware of the assets underlying it.
The third most valuable DeFi app after MakerDAO and Compound right now, Synthetix assets are assets representing real-world assets like gold. According to their official website, “The Synthetix platform enables the creation of on-chain synthetic assets (Synths) that track the value of assets in the real world.” Some assets that the platform supports are: synthetic fiat currencies (USD, AUD, KRW etc.). It has no liquidity limitations nor a lower entry barrier that makes it highly attractive.
The bZx Protocol is a platform that enables users to lend, trade, fund on the Ethereum blockchain in a fully decentralized fashion. Its uniqueness is that is can be integrated into our current exchange systems. bZx provides for two important tools. With Fulcrum, one can trade in assets with leverage and the second tool, Torque brings innovation to a different level altogether by enabling users to interact with human-readable addresses in facilitating borrowing.
Akropolis is a decentralized financial platform to manage the informal economy giving one full-fledged access to community management of finances, implementing cash-flow based management products. Giving an amazing platform for people with no credit score or history one can avail of all the benefits that an individual with a high credit score can!
Apart from the above 6 defi projects, there are many other recent launched DEFI project like KAVA, you can research on this project as well.