A Guide to Decentralized Finance
While Bitcoin and Ethereum have garnered much of the attention surrounding digital assets in the past 5 years, DeFi has been slowly stealing said attention in the investment community.
Decentralized Finance, or DeFi, first started gaining traction in the summer of 2020 and has had parabolic growth since. DeFi, in its most simplest form, captures the ecosystem of applications (or “protocols”) which are entirely built and distributed on cryptocurrency blockchains like Ethereum and Solana. These applications provide users with the same functionality as traditional finance (e.g., borrowing, lending, exchanging, etc) except that they’re decentralized; meaning there is no trusted intermediary between parties.
We put together this resource to assist financial advisors in understanding DeFi, including:
- The key characteristics of DeFi
- A brief history of DeFi and the ecosystem
- Understanding the risks associated with DeFi
- Transitioning from traditional finance to decentralized finance
- How to conduct due diligence on DeFi protocols and applications