To Infinity and Beyond: a Review of DeFi in 2020

  • DeFi is an open-source financial system for anyone in the world who wants to use it — all you need is an Ethereum wallet. Anyone in the world can access DeFi. There is no credit check and no banker who can say yes or no.
  • Traditional bank accounts yield almost no interest on deposits. For instance, the interest rate on a Fidelity bank account is 0.01%. By allocating digital assets to DeFi, the smart investor can earn anywhere from 5 to 10% on their deposits.
  • Sending money around the world is expensive and slow. $100 sent from Norway to the United States will take five days to get there and cost 10% in fees. Compare that to sending a stablecoin: ten minutes and the transaction costs a dollar or two.
  • There is less accountability. Anyone can create a DeFi dApp and take deposits. If the dApp is buggy and loses money (which happens) there is nothing investors can do. That’s different from a bank account with FDIC insurance or money held with a company like PayPal, which would be liable for losses.
  • Scams can proliferate since they can’t be stopped. Even when a project is a known scam it can’t be shut down, which is bad in that unwitting investors can continue to lose money, but good in that it shows how DeFi is unstoppable.

DeFi is Hot: Here’s Why

How does DeFi work?

What are the main DeFi projects?

  1. Traders can deposit ETH into Maker and then take out a loan in DAI. In this way, MakerDAO provides decentralized leverage. It’s also one of the first times in history that someone can take out a loan without even having to provide their name.
  2. MakerDAO mints (creates) DAI which is the most popular decentralized stablecoin in the DeFi ecosystem. Many DeFi applications use DAI, and MakerDAO is the only platform that can create it.

Is DeFi a bubble?

The Promise of Ethereum

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