5 Things To Know About Decentralized Finance — The DeFi Series

  1. Decentralization, which is provided by blockchain technology
  2. Non-custodial products, meaning that there is no middleman between the user and the financial product being utilized, only a protocol
  • the delegation of power from a central authority to regional and local authorities
  • the dispersion or distribution of functions and powers
  • The algorithmic mechanisms by which nodes communicate
  • The means of approving transactions within the blockchain
  • The means by which new nodes are accepted into the blockchain
  • Lack of control over how the system works by those who prop the system up (the financial consumer)
  • Lack of transparency into how decisions affecting the financial system are made
  • Lack of control over and transparency into how your specific deposits are handled
  • The potential that arbitrary or bad-faith decisions by financial institutions or regulatory bodies could put your deposits at risk
  • Democratic control by participants (financial consumers) over how a system works
  • No central authority with outsize power to affect the fate of participants’ deposits
  • Greater reach to customers regardless of geographic location, as all one would theoretically need to participate is an internet-connected mobile device
  • Less vulnerability to outside breaches due to decentralized security protocols
  • Greater autonomy to customize specific blockchain protocols democratically, which may allow dynamic shifting of interest rates for lending cryptocurrency as one possible benefit
  • Lending and borrowing of cryptocurrency
  • Decentralized exchanges for purchasing cryptocurrency
  • The ability to bet on fluctuations in the value of assets by purchasing synthetic derivatives
  • Peer-to-peer payment services
  • Tokenized asset management

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