Using Jack Dorsey’s recent announcement that Square will develop a new finance platform for creating decentralized finance with Bitcoin, the world of DeFi should finally start speeding up and consuming the banks and the traditional financial sector.
As the Total Value Locked (TVL), mainly on the Ethereum platform, began to reach astonishing dimensions, Decentralised Finance (DeFi) made the financial industry sit up and take notice. DApps like Maker, Compound, Aave, Synthetics, Uniswap, and others provided various financial services, including lending, borrowing, futures, exchanges, and algorithmic trading.
The traditional financial world’s intermediators and gatekeepers have vanished. The decentralized nature of these DApps built on Ethereum allows users to trade without going through the identity checks and other formalities that traditional banking companies require.
To paraphrase Lex Sokolin, Consensys’ co-head of decentralized protocols:
The term “layering” refers to the process of different programming programs to work in sequential order, one after the other. For instance, according to a recent Wired article:
By the year 2020, a new evolution from DeFi had emerged in the form of yield farming. This was a method of collecting interest, fees, and other perks by depositing tokens on decentralized lending markets.
Jamie Burke, the CEO of Outlier Ventures, believes that, despite some DeFi protocols’ fragility, DeFi will finally triumph. He declares:
The question is whether Ethereum will remain the undisputed blockchain for DeFi initiatives or if others will supplant it. The switch from proof-of-work to proof-of-stake, as well as a major upgrade in the shape of Ethereum 2.0, will solidify that dominance.
The increase in transaction speed from 15 to 10,000 per second should undoubtedly assist.