At the Coinbase Winter 2019 hackathon, the company’s product manager Jacob Horne described DeFi as an opportunity that could change how individuals interact with markets. In a tweet, Coinbase said that the hackathon itself focused on building DeFi-related tools:
“DeFi, or decentralized finance, is an essential part of an open financial system. DeFi tools are censorship-resistant, unbiased, programmable, and available to anyone with a smartphone. For this hackathon, we’re focusing on bringing DeFi to the world.”
$657 million locked in DeFi, mostly platforms built on Ethereum
According to DeFi Pulse, a site that analyzes and ranks DeFi platforms, the total value locked in DeFi has reached $657 million in Ethereum. It is up by more than 38 percent since October, within a two-month span.
Considering the rapid growth of the space, Horn said:
“DeFi is an opportunity to build financial infrastructure that spans the world, is open to everybody, and starts to change how we interact with markets.”
In essence, DeFi works similarly to existing financial products and banking services that allow individuals to receive and provide loans in exchange for compensation. However, with decentralized platforms, all transactions are processed in a peer-to-peer manner through the use of smart contracts on the Ethereum network.
DeFi is not limited to lending; the Lightning Network of Bitcoin is considered a part of decentralized finance as it enables users to send and receive payments instantly in a distributed ecosystem.
Other areas like decentralized exchanges (DEXes), derivatives, and assets pooled together with major markets like lending form the foundation…