2020 was the year of the COVID-19 pandemic, in a broad sense. Governments have been found lacking since they bill for 1 million deaths and over 30 million infections. The institutions have crumbled. Politicians have responded too slowly. All the mechanisms in place and newly developed to protect us have collapsed: hospitals, elderly care, testing, supply chains of protective equipment, touch tracing, etc. Yet 2020 was also the year of decentralized finance, which became known as DeFi, to a very large degree.
Crypto is DeFi
In order to explain why DeFi caught the imagination of the crypto-landscape as a whole, it is less about the scandalous returns for farmers and more about the possibilities in the future.
Cryptocurrency has always been obsessed with potential prospects and the technologies behind them.
As Bitcoin ( BTC, in Spanish), came into being in 2009, those acquainted with it soon realized that it might be money’s future. Eleven years later, Bitcoin has fulfilled its pledge with its decentralized global system of nodes and miners, which keeps the network working and safe.
It is also an important company-wide investment tool that continues to increase in importance for investment. Not only is it a convenient and easy way for people to transfer money without authorization to each other. In expectation of capital growth, broad and company owners hang onto it.
Since Bitcoin still depends on a financial community surrounding it to keep it going, cash still functions like currency. But it is a very small ecosystem; consists of networks safe for transfers (miners and node operators), bundles and exchanges, through which digital and increasing numbers of fiats can be traded.
Yet a financial market design as we know it has more functionalities in mind: credit, lend, interest benefit, tax charge, savings, etc. Bitcoin never was built to handle any of these processes – but DeFi is.
The next logical step in improving crypto conventional finance’s progressive position is the development of a decentralized financial network based on Ethereum.
DeFi is Bitcoin 2.0 in several respects. And thus, DeFi — though focused on the composability of Ethereum and its intelligent contracting capabilities — fosters Bitcoin’s storyline into the future in which Bitcoin first gives us confidence. As we are about to understand from each new DeFi Protocol, this would be a world without banks: a world without banks.
DeFi reveals that Ethereum is complementary to Bitcoin. Ethereum is hosting a project that completes the Bitcoin loop by recreating the financial system both from within and outside.
The more vocal opponents of the DeFI subsector would point out that, along with many others, SushiSwap, Cream, and Yam appear, implying that the campaign is more of a circus than a credible challenge to an enormous finance service sector.
These protocols are labeled vampire forks, forks of existing protocols to capture liquidity. A groundbreaking Rolling Stone report helps bring them into context whether vampire forks are damaging – because they are uncertain. Matt Taibbi called the haemoth as he was playing the core role of Goldman Sachs in nearly every financial crisis of the previous century:
The great vampire calf wrapped around the face of mankind and continually crammed in the blood into something that smells like gold.