Learn About The Rising Financial Star: Decentralized Finance

The John Wick movies give us a glimpse into the long-standing and highly formalized criminal economy. There is a ubiquitous governing body, known as the High Table, which (in the movie, of course!) is older and larger than any government on the planet. As a result, this organization is safely above most laws in many ways. Yet, to stay that way, The Continental chain of hotels serves as the central bank of the criminal underworld and circulates unique gold coins used to purchase services in this economy.

So, why would the Continentals want to impose this system in the first place? This financial system set up by the High Table does not follow the rules and regulations of any government or public institution and has its own set of rules. To follow those rules and policies, they need a transparent financial system without any interference from the government or central banks.

This kind of financial setup works on the concept of Decentralized Finance. It is a new and exciting way to offer financial services that are aligned with the community’s long-term interests. DeFi can help scale existing projects that would be too large or risky for centralized finance approaches and unlocks opportunities that would otherwise remain hidden!

So, let’s unveil all the hidden details about Decentralized Finance to remain at the top of the financial game. People don’t change. You know that. Financial systems, they do.
 

Let’s Start With The Basics – What Is Decentralized Finance?

It's no hidden fact that the world is changing exponentially. With the introduction of industry 4.0 and the Metaverse, the world of finance is changing as well. The rise of the Internet and the adoption of smartphones have also increased the usage of financial services.

Undoubtedly, the cryptocurrency and blockchain market has grown tremendously over the last few years and shows no signs of slowing down. These innovations are a natural extension and advancement of the financial services that have been available for centuries. DeFi is amongst the forerunners in this aspect.

By now, you must have realized that the Continental hotel chain uses a Decentralized Finance system. However, one question that still remains unanswered is what does Decentralized Finance really mean? Well, Decentralized Finance or DeFi is an emerging financial technology that uses blockchain to provide secure and distributed ledgers/wallets in this fast-growing financial world.

It takes control of banks and institutions over the global economy and trade so an independent and decentralized system can exist. This is accomplished through Peer-to-Peer (P2P) financial networks that use security protocols, connectivity, software and hardware advancements. This definitely justifies why a decentralized financial system was depicted in the fictional crime world in the John Wick series.

This new-age financial institution has come a long way since it was born. A glimpse of its journey until today awaits in the next section. So, what are you waiting for?
 

Evolution Of Decentralized Finance

The story behind Decentralized Finance is the story of creating a new financial system that’s not based on bureaucracy but is transparent and secure. This would enable lower fees, faster transactions and more security; thus, it justifies why the underworld trusts it in the John Wick series!

The technological foundation of Decentralized Finance dates back to 2008 when the first blockchain was proposed as Bitcoin’s distributed ledger. However, it came under the limelight when Vitalik Buterin announced the Ethereum project in a white paper titled “A Next-Generation Smart Contract and Decentralized Application Platform” in 2013.

The first Decentralized Autonomous Organization (DAO), MakerDAO, was launched on the Ethereum blockchain the very next year by Rune Christensen with a vision to eliminate human error or manipulation of investor funds by automating the power of decision-making.

In 2015, Rune Christensen also introduced eDollar. The Ethereum Blockchain was launched to make trustless computing a reality simultaneously. This also paved the way for creating and releasing decentralized apps or dApps. Not much time later, Single-Collateral Dai (SCD) was launched to provide a proof of concept for the idea of decentralized stablecoin. With multiple launches on the Ethereum blockchain in 2018, the DeFi ecosystem has started to expand and by 2020, Ethereum 2.0 had launched to improve the network’s security, sustainability, efficiency and decentralization.

2021 marked the new era of DeFi with open, trustless financial services hosted on the Ethereum blockchain. The graph is expected to exponentially rise with new dApps and use cases in the coming years. #TheBestIsYetToCome

The history of Decentralized Finance had many phases and we revealed them all. So, let’s hop to the next section to know how it works!
 

Working Of Decentralized Finance

The Continental's financial system had a very peculiar working when it came to the use of gold coins pictured above. Part of the mystery was that everything in the Continental cost one gold coin – one gold coin for a drink, one gold coin for a gun, one gold coin for a favor, etc. Quite a puzzle, right?

However, you don’t need to scratch your head to understand the working of Decentralized Finance. 
 
The working of Decentralized Finance relies on blockchain technology which is also used by cryptocurrencies. A blockchain is a distributed and secure ledger containing applications called dApps to handle transactions, smart contracts, financial data, etc. and run them.

Unlike a financial institution, smart contracts replace the middleman in DeFi transactions. A smart contract is an Ethereum blockchain-based contract that holds funds that can be sent/refunded based on certain conditions. No one can change its live-running program once it’s been deployed – it will always run as programmed!

To help you understand this better, let’s assume you get your allowance of $100 every Friday. (We only asked you to assume!) For this, a contract was programmed to send money from the source account to your account each Friday. This contract will be valid as long as the source account has the required funds. No one can change the contract or add any other transaction fees (read middleman) or change the recipient of the allowance. The gist is your money will always remain safe and secure in a Decentralized Finance system.

After knowing its working, let’s move on to the following section to learn the key components of Decentralized Finance.
 

 The Working Of Decentralized Finance

 
John Wick and Winston were the key protagonists of the Continental Network (and John Wick movies!). Similarly, Decentralized Finance has five key elements that help this new-age financial system work.
 

• Open Ledger Standards

  They ensure that dApps are interoperable. Without using them, DeFi applications would not be able to work together.

• Stablecoins

  Stablecoins are pegged against real-world currencies or assets, making them more stable than typical cryptocurrencies. These are created to remain stable even though cryptocurrency prices keep changing, making DeFi more secure to market changes.

• Smart Contracts

  Smart Contracts automate the secures of Decentralized Finance. They can do anything from its working and lending to transacting insurance claims.

• Robust Marketplaces And Exchanges

  Decentralized finance exchanges make sure that users can trade digital assets without revealing their identities. Moreover, these exchanges save time, cut down fees as well as impose security. Marketplaces are a different take on online marketplaces since they enable users to exchange assets or products directly while removing any risk of encountering third-party issues or threats while trading.

• Asset Management And Insurance Platforms

  Asset management allows the users to manage their assets as well as provide investment opportunities. These wallets help interact with trading applications to transfer and buy digital assets. Moreover, it helps the insurance industry as it is burdened by too much paperwork and false claims.

After knowing the key components, let’s look at the benefits of Decentralized Finance in the next section.
 

Benefits Of Decentralized Finance

The Continental hotel chain provides immense benefits to John Wick. One of its significant benefits is the use of a decentralized financial system. Well, do you know Decentralized Finance has its own set of benefits? Explore it yourself:
 

• Tokenization

  Tokenization converts real-world assets into blockchain tokens that would represent tangible assets. This is a key feature of DeFi ecosystems.

• Permissionless

  Decentralized Finance removes the need to rely on financial institutions for oversight, data storage, servers and other factors.

• Tamper Proof/ Immutable

  As blockchain architecture is used in Decentralized Finance, financial data is tamper-proof, secure and auditable.

• Transparency

  All transactions, data and code in the blockchain network are transparent making it easier to scale and modify according to requirements.

• Accessibility

  Anyone with an Internet connection can have access to the DeFi platform.

Hey, wait! We are not done yet; the future of DeFi is waiting for you in the next section.
 

What’s Next In Decentralized Finance?

It is no hidden truth that the world of finance will change drastically with the advent of automation. More and more banks will be operated by codes and algorithms that don’t need any human interaction. In the age of economy-of-things, where machines can talk to each other, Decentralized Finance will enable every product or service to become autonomous. This will significantly enhance the concept of embedded finance – integrating financial services with traditionally non-financial services or products. #NotImmediatelyButDeFi’nitely

Let’s take an example – an existing embedded finance service such as Amazon's online store offers a “buy now-pay later” option that converts any purchase into an automatic loan from a third-party lending institution. Now imagine if Peloton could offer you “rewards tokens” as an incentive for your cycling workout and you can use these tokens from Peloton to clear the debt. Impressive, right! Well, DeFi will enable such scenarios and play an integral role in the evolution of the Metaverse as well. #ExcitingTimesAhead
 

The End 

 
Decentralized Finance is a fresh take on how our typical monetary system works. It can make an enormous difference to the current financial ecosystem. The ecosystem of this technology is vast and still rapidly in growth – it’s only a matter of time before it becomes widely accepted across the globe – not exclusively in the Continental organization in the John Wick series! We hope you must now have insights into this amazing technology with our introductory guide.