The core concept around DeFi (short for Decentralized Finance) is to build decentralized financial instruments independent of governments or traditional financial institutions. In short, the idea is to offer services without the need for intermediaries, with blockchain-based applications as the instrument.
Solutions in this area are increasingly disruptive, and every day these services are gaining momentum. “The use cases are more mature, and even the institutional market is already starting to look at this seriously”, said Transfero’s Director of Products and Partnerships, Safiri Felix, during the event “Distributed Economy”, promoted by the Brazilian Association of Fintechs (ABFintechs), held between November 10 and 11.
According to him, decentralized finance is a new way of thinking and reprogramming the financial system. “For example, today, the daily global transaction volume of protocols such as Uniswap is much higher than the traded volume of B3”, he said, mentioning that this is a clear sign that the market is increasingly relevant.
“Many users started using the internet with Windows as their operating system. However, most people already have smartphones with Android system, which is nothing more than a version of Linux, an open-source operating system. This is the analogy that helps explain the new arrangements and ways of using ‘programmable money’”, Felix said.
Lego pieces produce money
According to Pods co-founder and CEO Rafaella Baraldo, DeFi functions as Lego pieces, which can be “assembled in various ways”.
“Today, we have stablecoins, the derivatives market, exchanges, which can be assembled in various ways, building new products that are not possible in the traditional market”, he said. “DeFi relies on programmable money, which can be used in many ways to create new products”, she added.
For the head of cLabs in Brazil, Camila Rioja Arantes, the DeFi revolution goes beyond financial. “We are talking about a transformation in the relationships between people and their way of accessing the financial system and some services”, she explained. According to her, decentralized finance allows better income distribution and access, more smartly, to investments, financing, and benefits. “It is possible, for example, to better distribute aid, break down real barriers, and allow more people to have access”, she highlighted.
According to Camila, very interesting data is that, during the pandemic, the number of unbanked people fell 75%. “It is interesting that these people have access to services, in most cases via cell phones. That is, the biggest change is mobility”, she pointed out.
DeFi allows you to build collaboratively
During the presentation, the participants cited several examples of the growing use of DeFi, showing that the solutions are viable and that their growth is participatory. “Today the user can already make a loan and have collateral as a guarantee, for example”, said Rafaella. Stablecoins, in this scenario, is important to guarantee access to solutions.
For Felix, although this is still a niche, stablecoins solve some of the current problems, making it more straightforward to understand the concept of decentralization. “To enter this market, you need to have programmable money”, he pointed out.
However, he reminded that some innovations deserve caution and analysis by users. “Every week we have something new. So it is important to know the projects, understand the protocol and the risks involved. The tip is to never put in certain projects what the user is not willing to lose”, he instructed.
For the director of Transfero, it is essential to make DeFi more comprehensible for the common public, offering simplified experiences that facilitate access to the technology. “The best way to understand how it works is by interacting with the protocols. By simplifying the experience, more people will use the solutions”, he said.