DeFi — once an idea that few believed in — is gaining more and more ground with each passing day thanks to the growing number of adopters.
“Software is conquering the world. DeFi (is the software that) is starting to eat up Wall Street,” Tyler Winklevoss, founder of Winklevoss Capital Management, said in a recent tweet.
In its intended form, DeFi is finance that does not rely on central financial intermediaries such as banks, brokerages or heavy paperwork. Instead it relies on smart contracts — legal contracts written in and enforced by software/coding — on blockchains such as Fusion.
Alan Lane, CEO of Silvergate Bank agrees that decentralized finance will bring speed, security and efficiency to financial services. And as seen in the current financial landscape more and more household names such as Elon Musk, Jeff Bezos or Chamath Palihapitiya are getting on board and embracing the blockchain world.
This is clearly where DeFi is heading:
· Instead of proving creditworthiness to a bank to obtain a loan or to make a long-distance transaction, customers can use crypto as collateral to borrow money through the set terms of a smart contract.
· Instead of all payments running on traditional rails such as the automated clearinghouse, they will happen through one tap.
· Instead of the complicated tangled process of trading stocks on a stock market, people can buy and sell assets through a DEX. Betting on the future and maximising your earnings will be as easy as 1,2,3 with Chainge’s Futures and Options.
The decentralized digital asset exchange Anyswap is also a great example of pure decentralized finance. But we’re now aiming for A LOT more than that.
Decentralized finance can and will take on many of the roles that traditional banks fill today, like credit, payments, custody, investments, stored value and on-boarding to the financial system.
All in all, DeFi is highly resilient, fast & cost efficient:
- as opposite from banks or exchanges who are frequently closed or out of service, DeFi is a system that runs 24/7 with no fail.
- DeFi lowers the cost of financial services tremendously
- Less operational staff. Automation is achieved through code.
Meanwhile, hybrid versions of decentralized finance have emerged that blend traditional banking with DeFi. This is sometimes called centralized finance or CeFi. One example is Stablecoins, digital currencies that are always equal in value to a central bank currency such as the U.S. dollar and that have centralised issuers. Another example is Coinbase, which lets people buy cryptocurrency, stores it for them and lends against it in a centralised manner.
CeFi also improves in the resilience sector and lowers the operational costs. However, there is one thing CeFi could never guarantee: fairness. That is something only DeFi can accomplish.
And at this point in time, the world really needs a completely unprejudiced financial market with no discrimination between institutions and retailers - a market that always enforces the same rule for all players. Because the financial world belongs to everyone and not only to privileged financial oligarchs.
When a group of regular people wants to let’s say short the real estate market, they still need to ask centralized institutions to issue and sell them the needed financial instruments. And very few of us know the right way and have the corresponding financial instruments to do so.
The world has suffered enough because of the market’s biased approach in which a small group of people are both players and judges. When you lose, they say you are not a true professional. When you win, they say you‘re not allowed to play by their rules and dismiss you. How is that fair?
All of the above is highly important and is starting to hold the attention of all traditional banking systems because it takes up competition to a whole new level BUT at the same time, it presents new opportunities for banks to embrace and adapt to.
“There are a number of banks that quietly behind the scenes are spending a lot of time on this because they see where the puck is going to be, as opposed to where the puck is today,” said Caitlin Long, founder and CEO of the de novo Avanti Bank. “They understand there’s something big happening here.”
So this was basically a brief summary of where the Defi trend is going and where traditional and forward-thinking banks might play a role and create valuable partnerships.
The Defi movement
As mentioned in one of our previous articles, this movement does not resume to the technology shift alone but to a shift in people’s attitude towards banking and financial mobility. Retailers now have the power to come together and sustain their own views and financial predictions. This can be seen crystal clear in instances such as GameStop, which we covered in one of our previous articles.
Alan Lane, CEO of the $2.6 billion-asset Silvergate Bank in San Diego, is a proponent of decentralized finance.
“We believe DeFi could enable a more resilient, efficient and democratic financial system,” he said. “When traditional financial services are made available over a public, permissionless blockchain such as the bitcoin blockchain, anyone with access to the internet and a smartphone can send, receive and store money through a digital wallet.”
This could help people who are underbanked access financial services and better contribute to the world economy, he argued.
“There is an art to creating that experience,” Lane said. “Payments that take place on open, decentralized blockchains should look and feel the same way we make payments today with debit cards and smartphones.” Users wouldn’t even know their transactions are taking place on a blockchain because everything happens in the background.
The typical cross-border payment, Long said, goes through 6 different institutions: two central banks, two correspondents and an originator and a receiver bank.
“It’s very difficult to figure out where something got caught up in that process, because there are six different institutions involved,” she said. “You can’t have a straight-through process because you have so many intermediaries.”
In the future, Long sees the potential for pure decentralized (with no human component) finance.
“The automation of operational functions is 100% going to happen and it is happening. It’s just happening slowly.”
All in all, the Defi movement is taking the shape of a middlemen vs. communities battle. Fortunately for the latter, the outcome is obvious. Once put in motion, a financial revolution of this magnitude isn’t something anyone can stop, no matter how much the establishment resents it.
Chainge — the engine behind the revolution
Here at Chainge, not only do we support and encourage complete financial freedom but we expand it. We’re on the verge of launching the app that’s going to change people’s financial lives altogether and improve the blockchain ecosystem with never seen before capabilities (such as Time Framing and cross chain transactions)
The proprietary Fusion DCRM tech is at this moment the only real cross chain technology available on the market; and Chainge will reveal all of its advantages in an exceptionally user-friendly way. Chainge will introduce a brand-new series of functionalities that will improve and open countless doors in the blockchain world. And Chaingers will be the first ones to enjoy their benefits.
Not to mention our CHNG token economy that rewards anyone anywhere — willing to put in the work and support our cause — regardless of financial status or social background.
Chainge’s main goal is to build the fairest financial market, where all are equals and code is the sole judge. Financial derivatives are no longer the exclusive privilege of financial institutions. Everyone will be able to create financial derivatives on their own using the code we build on the blockchain: Futures, Options, Bonds, or other complicated/complex financial instruments.
Financial institutions will no longer be able to change the rules or suspend trading in the name of protecting retail investors so they can protect their own interest.
It’s high time we built an impartial financial world and connect with each-other to distribute opportunities equally. If we work together, it won’t take a long time for this to become reality. Because all we need is you.
If you’re going to stand by our side and fight for your right to a just and equal financial market, then we will win. Together, as a community. Because if true believers unite, then they can and will move mountains.
& see you soon in the app