DeFi, decentralized financeToday, it still plays a very marginal role in fintech and finance in general, since it was born only a few years ago on the world scene, but it is already causing fear to banks.
It is developed from the roots of blockchain, a young and disruptive technology that has managed to win headlines thanks to the growth of bitcoin in the last 5 years.
Today, DeFi It is used in the decentralized credit / loan system, in asset management, and to manage currency trading on decentralized exchanges.
As the word says, this tool is decentralized, that is, it is capable of doing everything mentioned above in computer systems without the existence of an entity, company or central bank that can change the rules decided beforehand.
This leads to an extraordinary result, which consists of eliminate third parties that until now had come between the saver / investor and the real economy.
The benefits are clear: brokerage costs are zero, security has reached almost 100% and trust has reached the highest levels because it is not put in the hands of people but in the hands of a machine, which is simply an enforcer of the rules of the preset code.
Certainly, we are still at the beginning and there is much to do to make this sector more and more friendly to the common citizen who knows nothing about computers.
There are several ways that DeFi will have to improve, such as making digital tools increasingly simple to use. These are products and services that are not yet minimally understood by the vast majority of the population at this time and, therefore, should be more accessible.
In summary, what is missing at the moment is to have a greater awareness of what DeFi is and what advantages it can offer. It is necessary to understand how to buy cryptocurrencies, tokens and participate in decentralized services to take full advantage of the economic benefits that can be achieved.
All DeFi projects should ignore the role of an ultra niche financial instrument consisting of speculators, traders, finance companies, and investors, but they must reach out to both young and old so that they can borrow and save money, as well as transact quickly AND easily.
At the moment, DeFi's market capitalization reaches around $ 955.2 million dollars a year.
A market that, after the sudden drop on March 13, has seen a continuous increase of almost $ 1 billion for stablecoins and tokens.
Figures that are impressive considering the potential expressed on February 15, 2020 when capitalization peaked at $ 1,253 million.
DeFi platforms like BlockFi, Compound Finance, Celsius Network, Nexo, and others should take on the role of protecting money, both against the increasingly obsessive inflation of fiat currencies and against the reckless use by governments of their citizens' savings.
These tools have the full potential to largely replace national social security institutions in the countries of the world.
However, the recent Covid-19 crisis has revealed an already latent and serious crisis, the financial crisis, which has had a negative impact on the confidence and risk appetite of institutional investors.
We have seen it fall the price of crude oil at historical lows, hitting a low of $ 37 a barrel on April 21, 2020. Dividends and financial resources from all oil companies, including the automotive sector, plummeted.
Stock markets around the world fell like never before. Stocks and bonds have never offered safe profits or at least avoided strong depreciation as they were too closely tied to the Deficit performance of entire countries or large companies.
The US EDF injects billions of dollars into the market, which inevitably depreciates it in the medium and long term.
While in Italy we have great financial figures like Corrado Passera, who insists on living the myth of Plato's cave as one of the men who likes to be chained inside the cave without wanting to go out and appreciate the truths of the world.
He doesn't want that. You would like to set an interest rate of 1.75% on the deposit in your bank's 24-month escrow account against the rates offered by DeFi platforms, ranging from 6% to 8% per annum with withdrawal and insurance of capital.
Own Bank of Italy reveals in a checking account survey released in September 2019 how account and credit card and debit card management costs have increased by more than 10%.
When the monetary and economic policies of the different countries fail, cryptocurrencies, at least those with high volumes such as bitcoin, prove to be always stable and increasingly used as cross-border payment methods in the long run. And where sudden increases in inflation or deflation create harm and instability for all, the stable coins in place provide stability and they leave their relationship with the dollar constantly unchanged.
If Bitcoin becomes increasingly mature in terms of payment methods, combined with savings management and most investments in secure, efficient and trust-free platforms, then we can say that the future of fair finance is definitely DeFi .