Mirrored in Russian.

It is a small wonder for myself  that the recent developments  in crypto allowed  the next door man to receive the financial services bypassing centralized banking systems. That is where DeFi  made a true difference in his everyday live. My post is aimed to consider which  DeFi trends could form out the  financial patterns of ordinary citizen.

To avoid ambiguity let’s define the notion of DeFi. Web is flooded with relevant definitions,  all focused on blockchain, dApps, smart contracts, protocols and such  stuff.[1–4]. Me, personally, likes concise explanation taken from Urban dictionary: “Decentralized Finance. Typically refers to apps connected to distributed ledger smart contracts.” [5]. But, could my neighbor challenge all those words?

I would make the concept of Defi for  my couch-patoto-neighbor real simple. This is the computer centered system that allows him to do borrowing, lending, farm a yield and all other financial fuss he has used to, literally on the couch without recourse to banks or other intermediaries. The  core of this system rests on the common accessibility of the required  services, financial transparency and the opensource software everyone, including him,  could check.  

The gears of DeFi are “immutable software programs”  each being referred to as    smart contract  “ intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract.  Smart contracts allow the performance of credible transactions without third parties”.[6-8] At same time, all transactions  history is stored on the blockchain which is a smart contracts habitat (thankfully my neighbor knows what it is).

Tracking DeFi services is a tricky business  because the industry is quite fragmented. A listing of DeFi projects can be found at defiprime.com or defirate.com. [9]




Most obvious DeFi  areas to illustrate are [9 - 16]:

1) Decentralized exchanges. Instead him sending funds to a centralized exchange, DEX will create a p2p environment for my neighbor so that he can directly exchange value with other users.

2) Yield farming. My neighbor can  facilitate for himself  “the process of earning a return on capital" by "putting it to the productive DeFi use” [10, 11]

3 )Decentralized loans and borrows. My neighbor,  the  owner of a cryptocurrency,  can lend it at interest to another user who is interested in  collateralized borrowing..

4) Decentralized insurance. My  neighbor can get a cost-effective insurance which “ is a practice or arrangement by which a company provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.” [15]

5) Oracles. Technique to feed smart contract with off-chain and/or in-chain data it needs. So, no need for my neighbor to worry about prices, supply volumes, dates and all those garbage that could stuff him a head.


References.

1.   https://defipulse.com/blog/what-is-defi/

 2.   https://blog.coinbase.com/a-beginners-guide-to-decentralized-finance-defi-574c68ff43c4?gi=a8069721010b

 3.   https://blockgeeks.com/guides/demystifying-defi-ultimate-guide/

 4.   https://academy.binance.com/en/glossary/defi

 5.   https://www.urbandictionary.com/define.php?term=DeFi

 6.   https://blog.chain.link/what-is-a-smart-contract-and-why-it-is-a-superior-form-of-digital-agreement/

 7.   https://blockgeeks.com/guides/smart-contracts/

 8.   https://tech.onliner.by/2018/02/16/blokchejn-i-smart-kontrakty

 9.   https://habr.com/en/sandbox/142900

10.  https://cryptobriefing.com/yield-farming-defi-beginners-guide-earning-interest-crypto/

11.  https://bitcointalk.org/index.php?topic=5272696

12.  https://blockfi.com/collateralized-loan/

13.  https://cryptobriefing.com/what-is-blockchain-oracle/

14.  https://defi.cx/oracles-in-the-defi/

15.  https://defiprime.com/insurance

16.  https://medium.com/tellor/what-is-an-oracle-in-defi-and-why-does-it-matter-72abc801b5d9

It's just a matter of time when projects that help people to invest into yield farming and other DeFi stuff. But the problem is how do you trust someone with your crypto? I personally would rather put my crypto into some relatively low risk liquidity pool than to send it to someone who will do that for me. The biggest problem in these projects is that you have to trust someone that he will not do an exit scam.