A new social movement to decentralize finance, DeFi, has been growing fast during the last couple of years. #DeFi, at its core, is a shared rallying cry to foment excitement around the global movement to put financial decision-making power back into the hands of the people.
The proposal by the #DeFi movement follows some core principles focused in promoting decentralization, social inclusion and higher standards of transparency:
- Interoperability and Open Source — Members of DeFi take interoperability into account when building their projects. This helps strengthen the compounding effects of all DeFi projects as a whole. Open sourcing helps DeFi reach this goal by allowing the community to collectively understand how all products can be woven together on a technical level. This allows a system like Ethereum to become a whole greater than the sum of its parts.
One of the key strengths of DeFi are the network effects. Like the fax machine, the network was pretty useless when there was only one. But when you start linking many machines together, the power of the network starts to take shape. Although it’s not a perfect analogy, the idea is that by stringing together a set of decentralized services, we can replicate and even surpass the offerings of centralized vendors, who probably make you jump through a lot of hoops first.
People are realizing this, and it is starting to become apparent. Due to the flat and open nature of DeFi, and its reliance on a shared resource (blockchain) that it leverages, costs savings can and are being passed onto the consumer.
2. Accessibility and Financial Inclusion — DeFi strives to create a financial system that is accessible to anyone with an internet connection. They believe in a world where value flows freely, regardless of one’s geographic location, much like Satoshi Nakamoto envision when he or she released the original Bitcoin protocol.
Lender of First Resort
The MakerDAO project aims to unlock the power of the blockchain for everyone by creating an inclusive platform for…
Now that we are significantly more advanced, and stablecoins like Maker’s DAI are out, we can do things like borrow from ourselves. The story of how one man paid off his mortgage by opening a CDP and leveraging his ETH is amazing. He essentially swapped out a 4% bank loan for a 0.5% CDP. All decentralized, all permissionless, all next-gen finance.
MakerDAO gets a lot of attention for its stablecoin, DAI, and it should. But I think people miss what is probably the bigger breakthrough, which is the collateralized debt position, or CDP, which essentially lets anyone in the world become a lender, liquidator, and borrower–no matter your financial situation or credit score.
3. Financial Transparency — DeFi believes that financial services should not be built in opaque silos, but rather that market-level information should be transparent to all participants while still preserving individual privacy.
BetProtocol believes that we are entering an era of “Transparency-as-a-Service”, or Taas, where the difficult tasks of proving that you are honest are outsourced to blockchain-based, decentralized protocols.
Players in the online gaming industry suffer from not knowing truly what the odds they are getting, or having to trust that a company they send their funds to is actually legitimate. They can’t go in there and inspect the code for themselves to see, ah yes, there really is only a X% house edge, for example.
On the other side of the equation, regulators have to manually check operators’ one at a time, operators who may have different backends or reporting systems. This takes a lot of time, and means a lot of wasted effort.
We want to be a key part of the DeFi revolution in order to protect players and enable regulators alike to better enforce AML and CFT actions.
BetProtocol supports #DeFi
We’re committed to building a safe, regulated, and decentralized future. It will become readily clear that blockchain in fact provides greater transparency and compliance capabilities than legacy systems. Everything from KYC to provenance to payments will become easier to integrate and fully compliant with consumer protection standards.
Don’t look now…but regulation is catching up
With the aid of increased regulation, such as Malta’s Gaming Authority (MGA) sandbox framework for the acceptance of Virtual Financial Assets and the use of Distributed Ledger Technology within the Gaming Industry, the market is now one step closer to enabling fully legal gambling and betting Dapps, that leverage the use of cryptocurrencies.
We see this as a very positive sign that the whole DeFi space is growing in the right direction. On the one hand, consumers need to be protected and standards need to be met to combat the worst of financial crimes such as money laundering and terrorism financing. On the other hand, silos need to be broken down, the playing field levelled, and financial inclusion needs to increase through the power of decentralization.
All in all, we see that these are all very positive signs. Let’s keep on developing and #BUIDL for a decentralized future.