To combat failing fiscal policies, currency manipulation and a shadow banking system that continues to feed fee-grabbing financial intermediaries, Ethereum developers are building tools that reimagine how money flows and how financial services are provided.
In a new blog post entitled, “2019 Was The Year of DeFi (and Why 2020 Will be Too),” Mason Nystrom, content marketer at the Ethereum incubator ConsenSys, explains the main objectives of decentralized finance and the Ethereum developers who launched new and original solutions that made DeFi the hottest movement in crypto in 2019.
“The current financial system is comprised of walled gardens with limited transferability or two-way access. Where interoperability is possible, it’s controlled by middlemen and rent-seekers. Open finance is defined by platforms that can work together with a degree of transparency with functions that complement one another.”
Ethereum is enabling interoperability, programmability and composability which enables other protocols to be built on top of the network.
He cites popular protocols that are offering an array of services. Crypto lender Dharma, which launched on Ethereum in April, matches lenders and borrowers peer-to-peer, allowing people to earn interest on their crypto; Compound, an open-source, autonomous protocol, is currently earning interest for over $119 million in crypto assets; and Dai, a decentralized stablecoin pegged to the US dollar that is issued by the MakerDAO protocol and implemented as an Ethereum-based ERC20 token.
“These various protocols showcase the power of composability: 1)Dharma provides an open platform by 2) leveraging Compound’s open protocol, 3) which predominantly lends and borrows the dai stablecoin created by MakerDAO’s protocol, 4) all on top of Ethereum. Boom.”
Nystrom expects an “explosion of synthetic assets and derivatives” to generate tens of millions in value in 2020, eventually reaching into the billions, as the open financial stack built on Ethereum supports a new financial economy.
But instead of replacing the legacy system, he predicts it will spur enhancements.
“[Remember] that this movement is not merely throwing out the old financial system, but rather integrating with the current system where possible and creating where necessary.”
You can check out the full post here.