DeFi and the Future of Finance

The traditional financial system isn’t meeting society’s needs.

Legacy finance is problematic in many ways, not the least of which is that it imposes high costs on consumers and businesses while offering little in return. The result is that the traditional financial system stunts economic growth. There’s an alternative, one presented by the burgeoning blockchain: Decentralized finance (DeFi) is a promising system that encompasses cryptocurrencies and other innovations, including stablecoins, prediction markets and decentralized exchanges. Ultimately, DeFi could be an “internet of money” that removes much of the friction endemic to conventional finance.

Even as technology has changed dramatically, the fundamental underpinnings of the banking system have barely evolved over the last century and a half.  The fintech sector has emerged to spur innovations that remove some of banks’ inefficiencies. But the powerful and deeply entrenched financial industry has little incentive to change. Bitcoin provides a compelling proof of concept: Launched in 2008, this decentralized store of value comes with a self-imposed cap of 21 million coins...