DeFi stands for "Decentralized Finance" and is one of the most ambitious ventures that has been observed on the blockchain technology market for a long time. While common banking products were for a long time the only access to financial services, DeFi wants to change exactly that. But besides a number of use cases that are more than interesting, DeFi recently even received prominent support.
Head of the OCC considers DeFi inevitable
Brian Brooks is the "Head of the Office of the Comptroller of the Currency" or OCC for short. The office is subordinate to the U.S. Treasury Department and is intended to monitor the national credit system in order to ensure, among other things, that American credit institutions remain functional and solvent. A task that one might think is rather conservative in nature.
However, Brooks has surprised many in the recent past and has been extremely progressive. Because not only Bitcoin aroused his interest, but the head of the OCC has apparently dealt with DeFi in detail. In October 2020 he revealed in an interview that in his opinion DeFi is not be stopped.
According to Brooks, decentralized networks are simply cheaper, faster and more resilient than any centralized service provider. In doing so, he not only confirmed the views of many proponents of cryptocurrencies, but also indicated that banks will have to reinvent themselves if they want to survive in the future.
What does DeFi have to offer?
Worldwide, retail investors have long since stopped receiving interest on their investments. On the contrary, for a long time there has been a discussion that banks could even charge negative interest rates. If one takes into account the fact that inflation devalues the savings amounts a little bit every year, there is already at least some kind of negative interest rate.
With DeFi, investors are practically putting their business back into their own hands, for example by being able to grant loans themselves and earn interest. At the same time the borrower can profit from additional liquidity without having to ask a bank for funds.
What the bank could previously offer as a service is now done by DeFi through smart contracts and DAOs. The protocol ensures that the parties can be confident that the terms of a loan agreement -to stay with the example -will be met in any case.
Not everyone can participate
Banks do not necessarily make their services available to every customer. Conversely, DeFi protocols have suffered from a very similar problem until now. While banks can take future income into account, the protocols are not able to do so.
This is because they are dependent on the participants also bringing in funds that bind them to the smart contract as reinsuranceor collateral. This is perhaps the only gap that DeFi cannot yet close.