Concepts developed in the DeFi space to increase efficiency in the traditional financial system are gaining ground, said Lambis Dionysopoulos, a researcher at the University of Nicosia.
How can DeFi applications be protected from becoming nonoperational under extreme stress? Is it really decentralized if some individuals have way more governance tokens than others? Does the anonymous culture compromise its transparency?on these questions and many others around DeFi. It contains eight sections and covers a range of topics, from the fundamental definition of DeFi to its technical, financial and procedural risks.
Cointelegraph spoke with one of the report’s authors, Lambis Dionysopoulos — a researcher at the University of Nicosia and a member of the EU Blockchain Observatory and Forum — to learn more about the most intriguing parts of the document. CT: In the report, DeFi is classified as “radical innovation,” while fintech generally is “sustaining innovation.” Could you explain these definitions and the difference between them?Sustaining or incremental innovations are improvements on existing products or procedures with the goal of better serving the same customers, often for a higher profit too. Fintech is a prime example of this.
CT: Is there any data confirming the hypothesis that DeFi can help the unbanked and underbanked? It seems that DeFi is popular firstly among tech-savvy individuals from developed countries.The notion that DeFi is popular with banked and tech-savvy individuals is both true and short-sighted. For traditional financial service providers, making their services available to an individual is a question of cost-benefit. Simply put, a large portion of the planet is not worth their “investment.
Secondly, and perhaps most importantly, DeFi can be lucrative. In the early stages of wild experimentation, early adopters are rewarded with high yields, handouts and price appreciation. This has attracted tech-savvy and finance-native individuals seeking a higher return on their investments. Market shakeouts will continue to separate the wheat from the chaff, unsustainable high yields will eventually subside, and individuals attracted to them will seek profits elsewhere.
CT: The report states that DeFi has so far had a minimal impact on the real economy, with use cases limited to crypto markets. What use cases do you see outside these markets?DeFi has the potential to influence the real world directly and indirectly. Starting with the former, as we become better at making complex technologies more accessible, the whole suite of DeFi tools can be made available to everyone. International payments and remittances are the first low-hanging fruit.
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