The Emerging World of DeFi—and How It Could Change Your Life
Everything you need to know about Decentralized Finance
August 6, 2021
We’ve all learned some new terms over the past few years: Cryptocurrency, Bitcoin, Blockchain, NFTs. Unless you work in the space, it can be hard to keep it all straight.
But as these buzzwords become part of the financial lexicon, here is one concept you should definitely get to know: Decentralized Finance, aka DeFi.
To put it simply, DeFi is the answer to our outdated, centralized financial system that relies on “intermediaries” like banks and insurance companies. Instead, DeFi applications replace central authorities with smart contracts built on trustless protocols. These allow for global and permissionless participation based on a set of rules defined in open-source software—meaning everyone has a say in how DeFi operates.
In short, DeFi is empowering individuals to take control of their finances, transact more efficiently, and see through the opacity that plagues our traditional financial system.
Get in the Know
Finance is, at its core, the allocation of capital to the people, places, and institutions where it can most efficiently be used. Our traditional financial system has assigned centralized institutions the role of allocating capital, enforcing rules, and ultimately building business models laden with fees. Recent events, like the patronizing treatment of retail traders by brokerage platforms, have also exposed the shortcomings, inefficiencies, and risks of legacy financial infrastructure.
It is clearer than ever that the big banks and institutions who handle our money aren’t prioritizing our interests.
Beyond trust, traditional finance has failed to innovate. Built on the legacy rails of the ACH network and FedWire, our largest institutions simply can’t meet the demands of the modern economy. What’s more, their fees are exorbitant and the service they provide is clunky, slow, and lackluster.
In short, traditional finance is just too centralized. You can probably tell where we’re going with this...
DeFi provides a stark contrast to traditional finance; it operates as a leaderless, market-driven financial system that thrives on low barriers and free-market competition. The DeFi ecosystem operates in a distributed, global, peer-to-peer network built on blockchain technology. It empowers individuals with access to financial services and instruments—payments, investments, insurance, margin trading, lending, borrowing, and NFTs—in a way that traditional finance simply can’t.
This new financial movement is dismantling the status quo to give ownership and independence back to The People. And that’s something we can definitely get behind.
At Rhove, our mission is to expand access and opportunity for everyone to own the places they love. DeFi helps us deliver on this mission. Soon, you’ll be able to put your cash to work—earning multiples higher than the market standard—with our very own DeFi solution for Rhovers. With the click of a button, you can begin saving to invest in the places you love.
Our high-yield account will grant Rhovers the power to earn far better returns than those offered by the average traditional banking options. Plus, blockchain technology makes transactions practically instantaneous, so your savings can begin earning interest as soon as you deposit them in your account.
Financial transactions facilitated by blockchain technology are secure and entirely transparent. Unlike your classic savings account, your money won’t just sit there and collect dust. With innovative technology and smart contracts, DeFi protocols have far more flexibility and room for innovation than conventional investing accounts. You can move assets or invest 24/7 with no lag time or fees, bypassing the traditional intermediaries that have always served as brokers of liquidity, security, settlement, and trust.
Where DeFi is Headed
The true democratization of finance we’ve all been waiting for has arrived. DeFi has experienced a cambrian explosion and found significant traction over the last year going from less than $1 billion in digital assets to more than $80 billion as of May across nearly 2 million users worldwide. Yet, the movement is still maturing.
The sky’s the limit for DeFi.
Globalized and permissionless, DeFi allows anyone to access funds at any time and conduct peer-to-peer activities. It only takes an internet connection.
No one knows where Bitcoin is headed or how much Beeple’s NFT will be worth in 2030. What we do know is that DeFi gives power to The People—and that’s something to get excited about.
If you need to brush up on some of the crypto jargon, check out our recent article on the new age of ownership technology, NFTs, and more.