Four billion dollars.
This is the total amount of funds locked in “Defi”, growing from just one billion USD in 6 weeks. “Defi” has had a tortuous path ever since its inception, but now the concept of “Defi” is gaining more attention.
So, what exactly is “Defi”? Is it just another blockchain hype, or could it really be an epoch-making innovation?
“Defi” stands for “decentralized finance”. Fusion (fusion.org) proposed the concept of “crypto finance” in its official white paper at the end of 2017 and began to focus on constructing digital financial technologies. “Defi” has gradually evolved over the years as more projects have started to focus on this field.
“Defi”, in short, is the use of blockchain technologies (including smart contracts, decentralized asset custody, etc.) to replace all “intermediaries” with program codes, therefore maximizing the efficiency of financial services and minimizing costs.
Every major technological revolution in human society has brought about a significant increase in production efficiency and a reduction in cost (of production, labor, etc.).. During the industrial revolution, machines replaced human labor; during the information revolution, emails replaced postal services; and in the upcoming blockchain revolution, smart contract codes will replace loan officers.
Judging from its current development, “Defi” can be classified into four categories.
The first category: Decentralized loan
The advancement of the Internet is so rapid, that nowadays you can easily use apps on your phone – such as Alipay – to manage your assets. However, you may be surprised by the fact that if you have 10,000 dollars to spare and put it in a fixed deposit, the yield you gain is 240 dollars in a year, and yet, if someone needs to borrow 10,000 dollars, they need to pay around 1,460 dollars of interest in a year.
Why is there such a huge discrepancy?
This is because the “intermediary” takes an enormous cut.
Understandably, we cannot deny the role of…