DeFi and the Future of Finance
Decentralized finance (or DeFi) has always been a big part
of what I hoped to see people build on Ethereum. Ideas around user-issued assets, stable-coins, prediction markets,decentralized exchanges, and much more had already been at the top of my mind as well as the minds of many others trying to build the next stage of blockchain technology in those special early days of 2013–14. But instead of creating a limited platform targeting a set of known existing use cases, as many others did, Ethereum introduced general-purpose
programmability, allowing blockchain-based contracts that can hold digital assets and transfer them according to predefined rules, and even support applications with components that are not financial at all.
People in the Ethereum community started working on applications such as on-chain stable-coins, prediction markets, and exchanges almost immediately, but only after more than five years did the ecosystem truly start to mature.
I believe that DeFi will create a new, easy-to-use and globally accessible financial system for the world.
For example, applications like stable-coins are some of the most valuable
innovations to come out of DeFi so far. They allow anyone in the world to benefit from the censorship resistance, self-sovereignty, and instant global accessibility of cryptocurrency while having the purchasing power stability of the dollar—or, if the dollar ever stops being stable, they enable people to quickly move their funds into another asset that does a better job of maintaining stability.
So why is DeFi important? Financial censorship continues to be a problem for marginalized groups, with restrictions and imposed hardships often going far beyond what is actually required by any law. This is doubly true once we start looking beyond the relatively safe bubble of developed countries. DeFi greatly reduces the cost of experimentation, making it much easier to build a new application, and smart contracts with verifiable open-source code greatly reduce
the barrier of needing to trust the founding team to manage
funds. DeFi offers “composability,” allowing new applications to easily and immediately interoperate with any other applications that already exist. These are serious improvements over the traditional financial system, and ones that I believe remain under-appreciated.
In the book DeFi and The Future of Finance, the authors discuss many of the additional improvements DeFi offers over the traditional financial system. The authors also explain the in-depth workings of many of the most important DeFi protocols today, including stable-coins, automated market makers, and more. I recommend this book to anyone interested in learning more about Ethereum and DeFi protocols.
You can get an electronic form of it here, or you prefer other form you can buy it on amazon from here.
Thank you for you attention and good reading.
