In the latter half of 2018, a network of projects began to build what we know as “DeFi” on the foundation of Ethereum. These new projects would take major steps towards bringing Crypto mainstream by beginning to compete with traditional financial systems. These projects started breaking through and gaining popularity by offering real use cases including collateralized lending & borrowing, yield farming, and, most recently, play-to-earn gaming.
However, what we have seen from DeFi so far barely scratches the surface of the potential. With a world that is terribly underbanked, DeFi offers those who may not have access to certain amenities via traditional finance a way up. By “ cutting out the middle man” so to speak, DeFi has offered opportunities to its users that have never been possible before.
Built off of the blockchain, DeFi is a powerful tool for those willing to learn its ways and build. Perhaps the greatest innovation from this new wave of financial technology is the implementation of smart contracts. While the idea for smart contracts can be traced back to the early 90s, the real implementation of these self-executing lines of code began in the mid-2010s and have picked up exponential growth in users since.
Through traditional finance, certain expectations were set in place from its inception. Most people don’t participate in the traditional markets other than keeping their money in a bank, getting financing for a home or vehicle, or setting aside money in a yield-bearing account with such a low-interest rate, you can’t even fight inflation rates. Many of those who dared for more in the traditional markets weren’t much better off - depending on their level of risk tolerance, they could hope to make single-digit percentage returns on their investments by parking in an investment long-term.
This is the biggest difference between DeFi and Traditional finance as DeFi incentivizes use for new assets by providing high APRs/APYs to its users and liquidity providers. While no one really knows the long-term plays for these yield farming applications, it is safe to say that, with the speed of innovation in the space, there will always be enticing opportunities in DeFi. Because risk tolerance does come into play, each person should understand completely the type of projects they are providing liquidity for or purchasing, knowledge is power (especially in DeFi).
One of the many solutions DeFi implements is exchanging assets on your own with the full speed of the internet. Users can do this anywhere they have an internet connection and any time of the day/week/year. This empowers users to have full control of their portfolios. With so much opportunity, it’s easy to see why so many people are migrating into space at a record pace.
DeFi faces a problem of resistance as it pertains to people’s adaptability, however. Especially with older generations, we see a general distrust of anything based so heavily on technology. Certainly, DeFi has had its incidents and issues, but as security and trust are built over time, more and more people feel safe entering the space. This is part of Rytell’s mission as we seek to implement a “landing pad” so to speak for all of these potential DeFi users. By providing a safe and educational environment in DeFi, we believe we could see explosive growth as people understand more about safe practices and strategies within the space.
Looking forward to the future, we can see so many possibilities and wonderful opportunities for people from all backgrounds, locations, and situations through DeFi. In many ways, DeFi can be an equalizer for all people empowered by the blockchain. We contemplate a world in which decentralized finance will replace traditional finance. Learning to manage all these new methods will be crucial for success and every person should make an effort to learn more in this area. Many of us on the other side of DeFi would summarize DeFi in a single, powerful word - “Revolutionary”.
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