DeFi: Is this the beginning of a new era in finance?

 

Decentralized finance, or DeFi, has started to gain ground in the talks and has aroused interest. CTF Capital began to make inroads into the DeFi world in late 2018 and early 2019. Cointelegraph en Español consulted Brian Prilick, CEO of CTF Capital, and Lucas Palomeque, analyst and DeFi trader, who analyzed the issue from Argentina.

Prilick and Palomeque considered the impact that stablecoins could have and how this could begin to generate a financial ecosystem of its own on the Ethereum blockchain. They observed that one of the most important legs for these protocols was the volume „locked“ into the protocols, and they began to work as Market Makers of different Decentralized Exchanges (DEXs). They also got involved in different arbitrage opportunities exploiting possible inefficiencies in the system.

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„What we could not foresee at that time, was the speed with which the market was going to evolve, from an idea without a name, which went through different types of denominations, to become what it is today, DeFi, Decentralized Finance. A space that went from having only one player, MakerDAO, to become the financial and technological innovation plant of last year. With companies that seek to use the technology behind the blockchain of Ethereum, the smart contracts, to be able to generate a disruption in the financial market“, highlighted Prilick.

Considering what has happened during this last year and a half in the market, they made a report with an update of the trends they saw emerging and shared it with Cointelegraph en Español. Here are the key points of that analysis.

Ethereum and smart contracts
„If at the beginning of 2019 there was any doubt as to which platform was going to win the pulse in the Smart Contract market, by this point it is clear that the only Ethereum Killer on the market today is Ethereum. Ethereum is the blockchain platform for smart contracts where the most transactions happen, in fact it recently surpassed the incredible 100 Million active wallet mark and is where all DeFi products and applications with real use have decided to be set up,“ they explained.

„This intense use has not come without problems, gas prices have increased exponentially, making the network prohibitively expensive for small players and the need to be able to scale the network is growing. On the other side of the coin, this has led to miners starting to generate more transaction fees for the Ethereum network than for the Bitcoin network.

The first one, which they considered of vital importance when talking about any kind of blockchain, is the community that was created around it and the facility that this community knew how to provide to bring new developers and followers to this market. „Talking about Ethereum is talking about technological innovation and new tools that allow small developers to create huge products with low costs. The main example of this is Uniswap, developed by a single programmer and that today handles hundreds of millions of dollars of volume per month. These opportunities and technical support make Ethereum have four times more developers than any other blockchain,“ they noted. For Prilick and Palomeque, having this much manpower developing is what drives innovation and keeps Ethereum on the cutting edge.

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On the other hand, they felt that Ethereum also has a pragmatism and a functional capacity that has allowed it to become the sandbox for testing any type of application, whether financial or organizational. It has allowed on it the creation of DAOs and its mix with financial applications. „On the one hand, DAOs experiment with how to create new types of organizations that are more flexible than traditional corporations and attract more and more specialized labor to work in the space. On the other hand, financial applications are beginning to allow more and more users to find real use for blockchains,“ they said.