Adrian Esquivel
September 13, 2021

DeFi Crypto & Blockchain: Finance of the Future?

<span  style="font-weight: 400;">If you ask the internet what DeFi is,  Wikipedia will tell you:</span><span style="font-weight: 400;">Decentralized finance  (commonly referred to as DeFi) is a blockchain-based form of finance that  does not rely on central financial intermediaries such as brokerages,  exchanges, or banks to offer traditional financial instruments, and instead  utilizes smart contracts on blockchains, the most common being Ethereum.</span><span style="font-weight: 400;">And we’re sure that the  above definition satisfies all your crypto-questions.  </span><i><span style="font-weight: 400;">Just  Kidding</span></i><span style="font-weight:  400;">.</span><span style="font-weight: 400;">Let’s talk about money. Not  direct deposit money, or printed president money, or gold bars, or buffalo  nickels - but the </span><i><span style="font-weight:  400;">first</span></i><span style="font-weight:  400;"> transaction system - bartering.</span><h1><span style="font-weight: 400;">Shekel and  Hide</span></h1><span style="font-weight: 400;">Money traditionally has two  sides; physical, and representational. The first form of money (as we’re  familiar with it today) was the</span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight: 400;"> Mesopotamian Shekel  </span></a><span style="font-weight: 400;">which  was minted around 5000 years ago. Before money, people “paid” with things  like shells and livestock but it’s not so easy to transfer a herd of cattle,  so coins became a marker to represent the actual wealth that was being used  as payment.</span><span style="font-weight: 400;">It all evolved from there.  The main lesson we need to take with us from financial history is that  </span><i><span style="font-weight:  400;">transaction</span></i><i><span  style="font-weight:  400;">convenience</span></i><span style="font-weight:  400;"> is a market driver.</span><h1><span style="font-weight:  400;">NASDAQ</span></h1><span style="font-weight: 400;">The </span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight: 400;">history of the  stock</span></a><span style="font-weight: 400;">  exchange is long and complicated. For our purposes, we’re going to fast  forward through the Venetians, East India Company, New York, and the  intricate details of the S&amp;P 500 Index. Why? Because to understand  the viral nature of blockchain, we need to first zoom in on the turning point  - when the stock exchange went fully digital.</span><span style="font-weight: 400;">The </span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight: 400;">Nasdaq</span></a><span  style="font-weight: 400;">, or National Association of Securities  Dealers (NASD) which has evolved into</span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight: 400;">Financial Industry Regulatory  Authority</span></a><span style="font-weight:  400;">(FINRA), is not a brick and mortar institution. It is a network  system that manages regulated stock transactions.</span><h2><span style="font-weight: 400;">Why Does This  Matter?</span></h2><span style="font-weight: 400;">Digital means Global.  Taking the necessity of a physical port away from financial trading opened up  entirely new pathways for trade between countries and international  commodities.</span><span style="font-weight: 400;">Now for the trillion dollar  question, </span><b>how does this apply to  Crypto?</b><span style="font-weight: 400;">Consider this  perspective:</span><b>NASDAQ </b><span style="font-weight:  400;">is to Global access as  </span><b>Amazon</b><span style="font-weight:  400;"> is to international shipping.</span><b>CRYPTO </b><span style="font-weight: 400;">is  to </span><b>NASDAQ </b><span style="font-weight:  400;">as viral TikToks are to the internet.</span><span style="font-weight: 400;">Amazon doesn’t have hubs everywhere  just yet - and neither does NASDAQ, countries such as Afghanistan,Andorra,  Belize, Burundi don’t have a stock exchange which means limits to access - in  the same way that Amazon does not ship to all  countries.</span><span style="font-weight: 400;">Though not 100% legal in  every country, Cryptocurrencies are harder to regulate, and are generally  more widespread than the reach of traditional or intensely regulated  exchanges.</span><img class="aligncenter size-full wp-image-15206"  src=""  alt="DeFi " width="888" height="439"  /><em><span style="font-weight: 400;">Legal map of  Bitcoin and other cryptocurrencies. Source:</span></em><h2><span style="font-weight: 400;">Blockchain  Access</span></h2><span style="font-weight: 400;">Think of Blockchain as a  database of hashtags. Each tag, or  </span><b>Block</b><span style="font-weight:  400;"> is its own ledger of transactions. Together, each block makes  up a network that is duplicated and sent to every system connected to the  chain.</span><span style="font-weight: 400;">Blockchain tech can create  different types of ledgers; temporary, private, public, permanent, etc. used  to store data for particular entities like payments to vendors, or Bitcoin  transactions.</span><span style="font-weight: 400;">Cryptocurrencies like  Bitcoin run on blockchain technology and can have their own privacy settings  that they host using Blockchain (which is a transparent ledger recording  database). The biggest bonus to running on Blockchain is the encryption  capabilities which provide security to the users and traders of crypto that  the individual currency providers may not necessarily  implement.</span><h3><span style="font-weight: 400;">How Blockchain  Feeds Viral Cryptocurrencies</span></h3><span style="font-weight: 400;">Cryptocurrencies like  DogeCoin and</span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight: 400;">  Ratcoin</span></a><span style="font-weight:  400;"> are value-tied to their usage, and their usage is tied to  hype..</span><span style="font-weight: 400;">Blockchains can be either  public or private but for a public blockchain, adding a transaction to the  chain is</span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight: 400;"> made by consensus.</span></a><span  style="font-weight: 400;"> Meaning the majority of the network  (chain) has to agree that the Transaction is valid. The people participating  in the chain are incentivised to verify transactions through rewards.</span><h2><span style="font-weight:  400;">DeFi</span></h2><a href=""  target="_blank" rel="noopener"><span style="font-weight:  400;">Decentralized Finance (DeFi)</span></a><span  style="font-weight: 400;"> is the encompassing term for apps  that facilitate blockchain and cryptocurrencies, though it is heavily linked  to the cryptocurrency </span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight:  400;">Ethereum</span></a><span style="font-weight:  400;"> which handles direct contracts and transactions - cutting out  intermediaries. The goal of DeFi is to take everything in the financial world  and decentralize the process by putting it on the blockchain.</span><span style="font-weight: 400;">Financial products  decentralized by DeFi include; exchanges, launchpads (IPO equivalent), loans,  and staking (savings account equivalent), to name a few. DeFi makes finance more  accessible to the general public, all that is needed is a device that  connects to the internet.</span><span style="font-weight: 400;">Take property for example,  DeFi can take an existing or newly created property, tokenize it, put it on  the blockchain, and make it accessible to anyone in the world. It’s  essentially decentralized real estate.</span><span style="font-weight: 400;">What’s the big deal with  decentralizing everything in the financial world anyways? Well, centralized  finance has gatekeepers and limits set to control transaction frequency,  trade times, speed, and user access. The biggest caveat to centralized  financing is the lack of transparency in the market. This leads to insider  trading in the market, along with any other potential misconducts. Blockchain  solves this by helping to level the playing field by allowing anyone to  access information regarding trades on the decentralized exchanges since  blockchain is public by default.</span><span style="font-weight: 400;">Think of DeFi as Blockchain  with enhanced adaptation abilities. Blockchain simply supports transparent  transactions among a network, DeFi can support more complicated processes  like token locks (projects will lock up tokens to drive up value), oracles  (reliable data from the real world), liquidity providers, non-fungible token  (NFT), supply chain management, options trading, just to name a  few.</span><h1><span style="font-weight: 400;">Future  Finance</span></h1><span style="font-weight: 400;">Cryptocurrencies are  challenging for a lot of people to wrap their mind around because it’s not a  simple concept, or a physical representation of  currency.</span><span style="font-weight: 400;">Crypto, Blockchain, and  their contemporaries are tech-based and while currencies like Bitcoin are  stabilizing, there are fringe currencies like DogeCoin, etc. that are highly  volatile and depend entirely on popularity (similar to driving up stock  commodities through hype).</span><span style="font-weight: 400;">Before we wrap this up,  let’s look at some of the possibilities of a Crypto  future:</span><ol><li style="font-weight:  400;" aria-level="1"><span style="font-weight:  400;">Blockchain technology allows banks and institutions to seize  this emerging tech and create their own “blockchain token” called the Central  Bank Digital Currency (CBDC).</span></li><li style="font-weight:  400;" aria-level="1"><span style="font-weight:  400;">DeFi projects are targets for hackers which can lead to  millions of dollars in losses.</span></li><li style="font-weight:  400;" aria-level="1"><span style="font-weight:  400;">A more inclusive format for transactions, and with less legal  limitations, Crypto/blockchain are appealing for developing countries looking  to establish or revitalize their world market appeal.</span></li><li style="font-weight:  400;" aria-level="1"><span style="font-weight:  400;">Decentralizing cuts out “legacy finance” which can create  obstacles for young companies, countries, and financial  communities.</span></li><li style="font-weight:  400;" aria-level="1"><span style="font-weight:  400;">Social Justices gravitate towards the open access attitude of  crypto, especially in how it relates to </span><a  href=""  target="_blank" rel="noopener"><span  style="font-weight: 400;">minority  groups</span></a><span style="font-weight:  400;">.</span></li></ol><h2><span style="font-weight: 400;">A Digital Barter  System</span></h2><span style="font-weight: 400;">There has been a lot of  debate on whether or not cryptocurrencies are a digital resurgence of the  barter system. DeFi is independent of banking institutions and governments -  meaning it’s about as </span><i><span style="font-weight:  400;">democratic</span></i><span style="font-weight:  400;">as you can get when it comes to money by being peer-to-peer  (P2P).</span><span style="font-weight: 400;">In networks, P2P represents  systems that are directly connected to one another via the internet, and  files can be shared without needing a centralized  server.</span><span style="font-weight: 400;">This is the concept that  crypto embodies, and P2P valuation is at the heart of the barter system. The  pro is inclusivity and value independence. The Con is value volatility and  hard to stabilize currencies.</span><span style="font-weight: 400;">What do you think about the  future of currency? Regardless of your opinion it’s clear that tech and DeFi  app development will play a key role. We’re here to help you navigate and  build out solutions to the ever-changing landscape. </span><a  href="" target="_blank"  rel="noopener"><span style="font-weight:  400;">Reach out </span></a><span  style="font-weight: 400;">to us today to learn how we can  help!</span>