“DeFi is a family of crypto assets and underlying protocols which together form a complex financial system that relies most heavily on the Ethereum blockchain. Like much of the crypto world, DeFi’s Key selling point is stripping out the middle man in trading, which cuts costs and Red tape” — Paul Ebeling
Using self-executing or “smart” digital contracts, developers can build applications on top of Ethereum and other blockchains. They are then used to devise new ways to borrow, lend and exchange assets in faster and cheaper ways than traditional finance.
While these projects cut out the established intermediaries in the financial sector via peer-to-peer networks, not all DeFi protocols may be decentralized enough to skirt regulation.
SEC Chairman Gary Gensler boasted in an interview with the WS-J published this wk, in which he suggested the agency would be taking a closer look at the sector.
Meanwhile, a widening range of big money players are now looking at cryptocurrency and blockchain-based protocols, trying to figure out if crypto fits in their portfolios.
For many traditional investors, getting their feet wet requires some valuation.
There is no unifying collective valuation framework for DeFi. It is a barrier for more traditional retail and institutional investors with no crypto exposure, even if they are willing to accept the higher volatility.
Have a prosperous weekend, Keep the Faith!