Overall, 2020 has been the year of the COVID-19 pandemic. Because it causes 1 million deaths and over 30 million infections, the authorities agree. Our institutions collapsed, the leaders were too slow to respond, and all the systems built to protect us – health care, elderly care, testing, supply chains for protective equipment, contact tracking and more – collapsed. But 2020 was also the year of decentralized financing that became known as DeFi.
DeFi is crypto
To understand why DeFi captures the imagination of the entire coded landscape, we must understand that this is not about the outrageous profits given to farmers, but rather about the future opportunities it provides.
Cryptocurrency and its underlying technologies have always focused on futuristic possibilities.
When Bitcoin (BTC) was born in 2009, people who were familiar with it quickly realized that it had the potential to be the future of money. Eleven years later, with its global decentralized system of nodes and miners keeping the network afloat, Bitcoin has fulfilled its promises and more.
Not only is it a reliable and fast way for people to send money without permission to each other, but it is also a true investment tool at the business level and the value of the investment seems to increase. Retirees and entrepreneurs are sticking to it in anticipation of capital growth.
Whatever “Bitcoin as an investment tool” is, it is still the most important money – the new currency for the new hyperlinked world.
Bitcoin and / or DeFi
Bitcoin as money continues to function as money as it still depends on the economic ecosystem around it to keep it alive. But this ecosystem is somewhat limited. It consists of those who protect the network where transactions are transferred (miners and contract operators), as well as wallets and exchanges where they can increasingly be exchanged for other digital assets.
But the architecture of financial services as we know it includes many features: lending, borrowing, receiving interest, paying interest, investing, etc. Bitcoin was not meant to satisfy all these mechanisms, but DeFi is.
The next logical step in the development of cryptocurrency will gradually be the role played by traditional economics – a growing decentralized economic ecosystem based on Ethereum.
DeFi is in many ways Bitcoin 2.0. Because of this, DeFi – albeit based on Ethereum’s adaptability and smart contract functionality – strengthens the future Bitcoin narrative that Bitcoin initially allowed us. Banks as we know them.
DeFi demonstrates that Ethereum complements Bitcoin. By recreating the financial system not from within, but from without, Ethereum supports a movement that complements the cycle that Bitcoin started.
Vampires are not that bad
Our banking system is down, and neither is the COVID-19 answer, but will DeFi really replace it? Most critics of the DeFi sub-sector point to the emergence of the Meme protocols Food SushiSwap, Cream and Yam, as well as many others, to suggest that this movement looks more like a circus than a legitimate threat to the financial services giant. …
These protocols are vampire sticks, which are an outlet of current protocols designed to absorb their flow. If vampire sticks are destructive – and it’s not certain – then the Rolling Stones main article helps put it in perspective. After analyzing the key role that Goldman Sachs has played in almost every economic crisis in the last century, Matt Taipei called the giant:
“A large vampire squid has wrapped itself around humanity’s face and mercilessly suppressed the blood in everything that smells like money.”
Maybe DeFi vampires can improve the ecosystem with a stress test. The vampires at Legacy Finance had only one task: to take money from everyone to gain a foothold.
From the Great Depression to the dot-com bubble and the explosion and the housing crisis, the Great Vampire Squid has experienced financial ruin out of self-interest and claws at almost every lever that has generated these catastrophic events in our recent economic history.
The sector as a whole has long ceased to meet most of our needs. Current accounts no longer pay interest, access to funds requires money, and large companies easily find financing, while small and medium-sized enterprises remain unresolved. Try to get a mortgage loan as an independent contractor with no benefits or job security.
Bitcoin democratizes money by freeing us from it in its old form. Now, DeFi has captured the imagination of the cryptocurrency world as its natural extension – not just the democratization of money, but also the democratization of the economy, and promised a seismic shift in the way people interact.