The Age of Defi

As the name already suggests, DeFi refers to the ecosystem of financial applications that are being implemented and provisioned on top of autonomous smart-contract systems. DeFi advocates the use of decentralized networks and open source software to serve a wide host of financial services and products. The decentralised networks are assumed to be transparent and trustless, thereby providing a robust framework for financial applications. At this time of writing, the most prominent functions of DeFi include:

• Monetary banking services (e.g., issuance of stablecoins or other crypto assets)
  • Peer-to-peer or pooled lending/borrowing hubs
  • Advanced financial instruments such as Decentralised EXchange, tokenization platforms, derivatives and predictions markets

DeFi is believed to offer numerous benefits in comparison to traditional financial services. By August 2020, it is estimated that no less than $6 billion worth of crypto assets are locked in DeFi, indicating the magnitude of the rather newborn notion. As impressive as this figure is, there remains an enormous room for growth, with the value locked figure is likely to continue to increase as yield farming and other forms of lending gain traction.