Technology

Will DeFi mark the beginning of the end of centralised finance, or mark its value?

Defy. To openly resist. DeFi. The contraction commonly used for decentralised finance. The buzzword used to describe the financial ecosystem getting plenty of mainstream traction sounds similar to the verb used to describe a refusal to obey. And from the outset, DeFi has been all about a defiance of the established hierarchy of banks, brokers and other assorted gatekeepers of traditional finance. “DeFi is the latest financial disruption technology that’s changing the financial landscape and architecture of finance as we know it,” says Jeremy Eng-Tuck Cheah, Associate Professor of Decentralised Finance at Nottingham Trent University. Inextricably linked to blockchain, DeFi uses the revolutionary public ledger’s decentralised position to make permissionless, peer-to-peer financial exchanges, without anyone else getting in the way. These contracts are ‘if…, then…’ instructions which are coded into a blockchain. In this context, for example, the instruction might be to measure the interchange of supply and demand to set interest rates and dictate the terms of specified financial exchanges in real time. No need for third-party involvement – which speeds up transactions – nor for negotiating, as all parties already know the terms of the smart contract.

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