Decentralised finance, also referred to as DeFi, has been very successful in recent years. But what is DeFi?
DeFi can be defined as a set of new financial tools based on decentralized systems and networks: it can be imagined as a great platform that currently uses mostly the blockchain and smart contracts of Ethereum.
One example is the Eidoo wallet, which in fact offers a unique and simplified interface to the various services offered by various DeFi platforms such as Compound.
The two main features of DeFi are:
- smart contracts;
- the use of decentralised networks.
Smart contracts allow the automatic execution of various processes, such as those involving lending between private individuals, in a secure and predictable manner, while the use of decentralised networks makes their operation transparent, public, open and above all secure, as well as predictable.
The choice of using the Ethereum blockchain was made not only because it is a decentralised network that offers the possibility of using smart contracts, but also because it allows the issuance of new tokens, for example in the ERC20 format, and because some of these already have a high capitalisation.
In particular, it is the market capitalisation of Ether (ETH), the second cryptocurrency in the world, preceded only by bitcoin, that has allowed DeFi to benefit from a liquid and valuable asset.
In total, the value of assets held in decentralised financial tools is already almost 700 million dollars, a record that has just been reached. Only a year ago this figure was below 200 million, so in the last twelve months, it has multiplied by 3.5.
To date, there are almost 2.7 million Ether locked up in DeFi, while a year ago there were only a little more than 1.5 million, even if, in reality, DeFi is still dominated mainly by a single service, MakerDAO, which has about 2 million ETH locked up.
Although the first DeFi instruments have been around for more than two years now, it was only in 2019 that interest in DeFi exploded.
Probably the main advantage lies in the decentralised nature of these new financial tools, which allow operating without limits, without obstacles, and without KYC.
In particular, the success of MakerDAO, and DAI, shows how much users appreciate being able to use a decentralised stablecoin that does not require KYC and whose use is in fact unstoppable.