Earnity, Domenic Carosa, & Dan Schatt: Is DeFi The New Big Thing in Crypto?

The crypto revolution revolves around decentralized finance. It stood out in a year when the world awoke to the reality that cryptocurrency was more than a techie toy and a tool for criminals. Earnity’s industry experts, Domenic Carosa and Dan Schatt, believe it is far too large for mainstream finance to ignore, with $100 billion invested. DeFi is cryptocurrency at its purest: a financial tool that requires neither a banker, a bank, a broker, nor a brokerage.

It is an entirely peer-to-peer method of doing what financial institutions have done for centuries — providing a source of trust — without having to pay the levy demanded by a trusted third party, which is why it has generated so much interest. Unfortunately, however, the theory is generally messier than fact, and DeFi is no exception.

Decentralized exchanges (DEXs) can provide trades and derivatives at a lower cost and in a shorter time frame than even “centralized” crypto. And the lending and borrowing platforms can offer far better rates to both lenders and borrowers than any bank. However, DeFi, like any financial offering, carries risks: the same old scams and the new technological wrinkles of new technology with no corrections or do-overs. There are also new products to learn about, such as yield farming and liquidity pools.

What’s with the craze?

First, regulators have been slow to catch up, allowing DeFi to thrive in the void. For example, in traditional unsecured lending, lenders and borrowers must know each other’s identities, and the lender must assess the borrower’s ability to repay the debt. But, there are no such requirements in DeFi. Instead, everything revolves around mutual trust and the preservation of privacy.

According to Domenic Carosa and Dan Schatt, industry leaders from Earnity, another reason for the DeFi boom is the involvement of mainstream players. Many traditional financial institutions are beginning to accept DeFi and are looking for ways to participate. Additionally, major asset management firms are also starting to take DeFi seriously.

One final important reason for the increase in people investing in DeFi tokens is to avoid missing out on their explosive growth. Unfortunately, many coins are worth nothing or nearly nothing in practical terms, resulting in irrational exuberance. Nevertheless, whether everyone likes it or not, a new financial system is now well on its way, providing a more liberal and decentralized system than the current one.