To a rapidly growing population of believers, the open, public blockchain aims to build a new digital economy.
 
The fact that the applications built on top of such blockchains all work with each other, and that the information they store is visible to all, harks back to the idealism of the internet’s early architects before most users embraced the walled gardens offered by tech giants.
 
The idea that a new kind of “decentralized” digital economy might be possible has been bolstered over the past few years as the numerous applications being built on top of various blockchains have boomed in size and functionality.
 
Perhaps the most significant part of that economy has been decentralized-finance (DeFi) applications, which enable users to trade assets, get loans and store deposits. Now an intensifying battle for market share is breaking out in this area.
 
Early players like Ethereum, who provide the backbone infrastructure to make this possible and also who are the leading DeFi platform, seem to be losing its near-monopoly. The struggle shows how DeFi is subject to the standard wars that have broken out in other emerging technologies—think of Sony Betamax versus VHS video cassettes in the 70s—and illustrates how DeFi technology is improving lightning-fast.
 
The idea behind DeFi is that blockchains—databases distributed over many computers and kept secure by cryptography—can help replace centralized intermediaries like banks and tech platforms. The almost unbelievable growth of new players and adopters is seen in the numbers. The value of assets stored in this nascent financial system has climbed from less than $1bn at the start of 2020 to more than $200bn today.
 
Current blockchain technology is understandably clunky, considering it’s a whole new concept and technology. That’s changing super-fast with new algorithms, technologies, fuelled by hyper innovation.
 
Some Big Banks have already been instrumental in the development of the digital ecosystem and have been experimenting with distributed ledgers and tokenization since more than 4 years.
 
Interesting to see how legacy, centralized finance will coexist with decentralized Finance or will one win over the other, especially in light of growing regulation kicking in globally.
 
Will we see Big Tech take it all? Or will it be Big Banks? Umm…The very factor that ‘decentralization’ aims to eliminate.
 
A new era of sorts and for as long as decentralized finance holds promise, the competition in this space will naturally be fierce. But the idea that the eventual winner will take everything, gaining overall control over the digital economy and how it develops, may one day come to seem as outdated as the video cassette.