Decentralized Finance, or DeFi, is a financial system built upon the Ethereum* blockchain. The Ethereum blockchain acts as a network that enables interoperability in the same way that the SEPA system allows for greater fluidity between traditional European financial systems. DeFi is made up of protocols, decentralized applications (Dapps), and digital assets (cryptocurrencies) and strives to replicate all financial services - savings, lending, borrowing, insurance - through open source code. As opposed to traditional finance (also called "legacy finance") that is mediated by central institutions like banks and governments (among many others), DeFi envisions a world where anyone with an internet connection can take advantage of any number of financial services without having to go through a bank. Some call it "the great unbundling" of banking services into applications that can interact on an accessible public network.
While this may sound like a utopian thought experiment, Decentralized Finance is one of the fastest growing sectors in fintech and has attracted institutional support. According to Cointelegraph, between 2019 to 2020 "the total value of Ether locked in DeFi markets has increased from $317 million to over $1 billion." As of writing, DeFi Pulse has recorded over 10 billion dollars invested in DeFi markets.
In June 2020, Fidelity published the results of a study where they found that some 80% of institutional investors found something appealing about digital assets. At Multis, we believe these innovative financial services shouldn't be reserved only for asset managers and hedge funds. SMEs have everything to gain from the services of DeFi. If you're interested in learning about some empowering use cases, risks, and how to get started with your business and DeFi scroll down to download Breaking Legacy.
*While there are some DeFi applications built on the Bitcoin blockchain, their numbers remain marginal compared to Ethereum. This guide will focus on the Ethereum blockchain.