DeFiance: Billion-Dollar Finance and Very Little Value

DeFi seems more like cosplaying a financial system than an actual viable alternative. Don’t expect to see it crossing that divide any time soon, if ever

DeFi stands for Decentralized Finance. It’s supposed to be an entire alternative financial system. One day, its visionaries say, you will be able to use DeFi to borrow and lend, to buy and sell all kinds of exotic securities, and to acquire insurance and make claims, all via completely decentralized networks and protocols, no banks or brokers or trusted third parties required, just irrevocable and implacable software, “code as law,” with no human beings involved except for you and (maybe) your counterparties, while never having to fill out any paperwork or apply for permissions, and trusting your money to no entity except whoever holds your private key(s). One day.

Many people find this a stirring, inspiring vision. However, DeFi today is very few of those things. Today it allows you to borrow crypto using crypto as collateral; use that lending market to earn interest on your crypto holdings; trade crypto via decentralized exchanges, or DEXes; commit your crypto to liquidity pools, in exchange for a percentage of fees; insure yourself against hacks somewhat; and, well, that’s pretty much it.

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