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DeFi Explained


What is DeFi?
How DeFi Works

DeFi, or Decentralized Finance, encompasses a set of projects, companies, and protocols that run on Blockchain networks to create a global financial ecosystem that eliminates the need for traditional intermediaries, like banks and brokerage firms.

Fintech solutions can help make financial systems more user-friendly and quicker on the front-end, but these solutions sit atop the same sluggish systems and processes that effectively pre-date the internet. So to truly advance our financial systems, we need a tool that can disrupt centralized financial systems from the ground up, remodelling them completely. 

This is where blockchain technology enters the scene. Now, for the first time in human history, two or more parties anywhere in the world can transact and do business peer-to-peer. Trust is established, not by powerful intermediaries, but rather through collaboration, cryptography and clever code. Blockchain technology proved to be a runaway success for Bitcoin, so people began expanding it into other asset classes where "middlemen" were traditionally involved. And that is how the concept of DeFi, or Decentralized Finance, was born. 

Today, it is the fastest growing sector of crypto assets, largely powered by Layer Two solutions on the blockchain that increase efficiency and scalability and help make the sector as a whole more accessible to everyone around the world.

Decentralized Finance allows for financial interactions of all types to be governed by smart contracts. The bulk of these smart contracts have so far been powered by the Etherium network. However, the newest development in decentralized finance is focusing on Layer Two networks, which can be generally described as ‘non-Etherium’-networks. These protocols are faster, more efficient and more scalable, albeit at some greatest risk to security and decentralization. 

The main areas of focus are currently:

  1. Trading
  2. Lending
  3. Derivatives

Decentralized Finance protocols are capital intensive, so staking capital into new networks is highly valuable and is rewarded with larger yields. The core idea behind these three main focus areas is to provide greater access to everyone around the world to these previously rather inaccessible areas of financial markets.

Where We Fit In

To do well as an investor in DeFi, it is essential to have highly sophisticated financial and technical knowledge about the space and the rapid changes inherent in the sector. 

Prophecy DeFi is actively creating an ecosystem of the most advanced and cutting edge companies, developers, projects and thought leaders, who can generate outsized returns and simultaneously accelerate the growth of the sector as a whole. 

For everyday investors, it is risky to enter DeFi on their own, without the protection and de-risking mechanisms in the markets we are used to, such as equity markets. As a publicly traded company on the CSE, Prophecy DeFi (CSE:PDFI) gives investors the opportunity to capture the upside of DeFi through equity markets. It is the easiest and safest way to gain exposure to DeFi and get in on the ground floor of a dramatic shift in how financial systems are looking to operate in the future.

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