If you have been following blockchain, you have probably already heard of the recent emerging industry called DeFi, which has experienced substantial growth, and is now worth over $123 billion. Everyone is talking about Decentralized Finance and DeFi projects.
Before we go any further, let’s explain what exactly DeFi is, and why it’s so important.
DeFi follows the idea of rebuilding the infrastructure of financial services and moving it into a fully decentralized structure, removing the need for third parties such as companies and governments. We need DeFi because it has the unique opportunity to revolutionize the global financial landscape.
According to crypto market data aggregator Dune Analytics, we can see that cumulatively, the total number of unique DeFi user addresses has grown , an increase of roughly more than 20 times over the past year.
While DeFi is, without a doubt, a revolutionary concept, the question is , is it possible to replace the deep-rooted traditional financial system by defi?
The financial world has transformed drastically over the last decade. We have witnessed unprecedented growth of fintech and digitalization of financial services at scale. However, nothing comes close to the revolution brought with the origin of Blockchain, through the first cryptocurrency — bitcoin .
Back in 2008, when the world was hit with economic recession due to the bankruptcy of US investment bank, Lehman Brothers Holdings, people’s shattered trust demanded a change in the financial ecosystem which led to the commencement of bitcoin , introducing the world of finance to a simple yet powerful concept of decentralization through Blockchain.
Aiming towards Decentralized Finance (DeFi), we need to understand that a total replacement of the traditional system is impossible. On the other hand, we have had a taste of the powers of DeFi such as high interest, more transparency, and lower transaction fee. Therefore, we are stuck in a world which is not completely ready to replace the traditional system but not ready to give up on this futuristic technology as well.
Filling the gap between traditional financial systems and decentralized systems is where our dilemma ends.
It’s probable that we are still very early on when it comes to the rate of DeFi adoption. Freedom from the monetary control of centralized institutions is the ultimate vision of this movement.
The growth of decentralized finance (DeFi) has been the big cryptocurrency story of 2020, and with good reason. We’re probably looking at the future of the Financial Services industry; however, there is still a long way to go.
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