DeFi builds on three major waves of blockchain innovation across the last decade, each of which began with deep skepticism and has since progressed to acceptance and adoption.
While it’s still early days for DeFi (just a couple years in), its associated economy is already large and consequential: Ethereum, the backend infrastructure for DeFi, settled about $1.5 trillion in transactions last quarter, or 50% of Visa’s payment volume; decentralized money markets are issuing billions of dollars worth of loans every month; and individuals and businesses are using platforms like the Uniswap protocol to trade volumes roughly 30% the size of Coinbase’s. [Disclosure: I work for Uniswap Labs, which helped invent the protocol.]
Since there’s so much interest in this trend from entrepreneurs, corporate leaders, policymakers, and institutions big and small, I will try to explain the features and benefits of DeFi, outline some challenges ahead, and consider the road to mainstream acceptance and adoption.
But first, what made it all possible?
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