financialstrategies

Few had heard much about decentralized finance (DeFi) in its early days in late 2017 and late 2019, beyond murmurs about Bitcoin and a mysterious new digital technology called blockchain.

But a pandemic can change everything.

Since May of this year, the total value locked (TVL)—the amount of any currency locked into tokens, the vehicle of holding and moving assets on blockchain, in smart contracts on a blockchain ecosystem—in decentralized finance projects rose a whopping 2,000 percent, according to DeFi Pulse. Many investors would be hard-pressed to find such an astronomical rise of any assets or expansion of any financial ecosystem, but DeFi app developers seemed to find success. So what’s the rage, and why does it matter going into the new year?

What is DeFi?

DeFi, many fintech leaders argue, is the world’s answer to the 2008 financial crisis. Thanks to poor decision making and a lack of proper financial regulation, legacy financial institutions brought the world’s economy to its knees in the most major financial crisis since the Great Depression. The knee-jerk reaction was to create an ecosystem dependent on every link in the chain, rather than centralized authorities—hence the term “decentralized finance.”

The concept of blockchain, a decentralized ledger, was designed to ensure financial transactions would be transparent. Moreover, transaction approval would come from network individuals incentivized to approve them by solving complex mathematical equations or by network consensus voting.

Later, the idea of operating a decentralized financial system on a decentralized ledger, independent of legacy institutions, grew into a thriving, albeit relatively small, ecosystem. Now, users can find financial services on the distributed ledger for loans, insurance, margin trading, exchanges, and yield farming (yielding rewards from staking digital assets on a network to help facilitate network liquidity).

But there is still a way to go. Not enough consumers are comfortable with DeFi quite yet, because platform accessibility and blockchain tribalism remain a problem. Nevertheless, now the world is experiencing another economic crisis brought on by the COVID-19 pandemic, and DeFi is finally getting its day in the sun.

E-wallets are leveling up

For companies and individuals already active in the space, navigating the ecosystem remains impeded by technical limitations. In order to access certain markets and execute transactions on the blockchain—whether it’s borrowing or lending, staking assets in liquidity pools, or trading on an exchange—users need to own an e-wallet that’s properly connected to the ecosystem.

E-wallets are the backbone of transactions on blockchain. Just as the digital assets they help transact and store, these wallets are secure, transparent, and easily accessible to users. At least, that’s the idea behind them, though there are various degrees of security and transparency. For DeFi to attract more users, the wallets must be compatible with multiple blockchains running financial dApps (decentralized apps that operate on a blockchain system). One of the first wallets, created by Ethereum and called “MyEtherWallet” (MEW), lacked a user-friendly interface and was challenging to grasp for people outside the hardcore crypto crowd.

Since then, a number of blockchain developers have created alternative e-wallet solutions. Most recently, Spielworks, a blockchain gaming startup, reached an agreement with Equilibrium and DeFiBox to integrate its e-wallet “Wombat,” which is currently available on the Telos and EOS blockchain mainnet (a blockchain network that is fully developed, deployed, and operational).

The Wombat wallet provides users with access to several DeFi platforms that offer token exchanges, yield farming, borrowing, and lending. Wombat recently also integrated with Bitfinex’s new EOS exchange, Eosfinex, as well as 8 other DeFi networks. Rather impressively, the wallet also offers free and fast account creation, automatic key backup, and free blockchain resources.

Developments in blockchain wallets, such as Wombat’s, will be pivotal in the next few years in the growth of DeFi applications and the movement of users toward decentralized finance and away from traditional finance. While wallets are important, so are the underlying mechanisms to piece the entire ecosystem together, because one a DeFi ecosystem is not enough if confined to just one blockchain mainnet.

Piecing it all together

“A house divided against itself cannot stand.” President Lincoln’s famous quote referred to the Civil War that ravaged the United States at the time, but his historically renowned words can apply very well to the blockchain community today.

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For DeFi to reach its maximum potential, as a decentralized ecosystem that doesn’t answer to a central authority, blockchain platforms must stand united and interoperate. Could anyone imagine if payment transfers between regular banks were not possible? How could an economy function? This is the sort of technical problem plaguing the DeFi world: Each blockchain platform has its own benefits, but each remains largely separated from the others in its own silo. The root of the problem is attitude, the other part is technical limitations.

Ethereum and EOS are primary examples of this sort of rivalry, both of which have their own technical benefits for dApp developers. If the two ecosystems could be connected to one another, EOS-based and Ethereum-based developers alike, for example, could benefit from each other’s platform’s strengths. Users could also benefit, via financial opportunities without having to sacrifice shifting their base from one blockchain to another.

This is precisely what LiquidApps’s latest development—its DAPP Network bridging—has solved. LiquidApps’s technology provides the technical mechanisms to connect separate blockchain mainnets and recently provided its tools to EOS-based developers to successfully deploy a bridge between EOS and Ethereum.

This was shortly followed by decentralized social media app Yup’s deployment that demonstrated the possibility of moving tokens easily between different once-separate blockchain mainnets. It still remains to be seen how long it will take before blockchain platforms themselves integrate built-in cross-chain technologies, but LiquidApps is starting the next crucial step to DeFi development.

Whether it’s cross-chain technology or the e-wallets that grant access to dApps, tech developments and attitudes in the DeFi space over the next few years will determine its success. The latest developments suggest the future of DeFi looks promising. Time to go decentralized.

By: Ariel Shapira Entrepreneur Leadership Network Contributor

Paris Fintech Forum

by O. Bussmann, CEO, Bussmann Advisory (CH) Speakers *M. Froehler, CEO, Morpher (AT) *H. Gebbing, Managing Director, Finoa (DE) *U. Shtybel, Vice president, HighCastle (UK) *N. Filali, Head of Blockchain Program, Caisse des Dépôts (FR) more on http://www.parisfintechforum.com/videos2020

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Start trading Bitcoin and cryptocurrency here: http://bit.ly/2Vptr2X DeFi applications – https://defipulse.com/defi-list/ DeFi is becoming more and more popular as the main use case for cryptocurrencies. This video explains in detail what DeFi is and what you should know about before getting involved. 0:38 Bitcoin and Our Financial System 1:24 Our Centralized Financial System 1:59 What is DeFi? 2:22 DeFi Components 4:16 – DAI explained 5:51 – DEXs explained 6:33 – Decentralized money markets 8:06 Money Legos 8:56 DeFi Advantages and Risks 10:02 Conclusion For the complete text guide visit: https://bit.ly/2R35g6Z Join our 7-day Bitcoin crash course absolutely free: http://bit.ly/2pB4X5B Learn ANYTHING about Bitcoin and cryptocurrencies on our YouTube channel: http://bit.ly/2BVbxeF Get the latest news and prices on your phone: iOS – https://apple.co/2yf02LJ Android – http://bit.ly/2NrMVw2

For the past month or so, normal life in the U.S. has ground to a halt as states and cities work to slow the spread of COVID-19. These steps, which include collective stay-at-home and physical distancing orders, are necessary to save lives. But they come with an economic cost.

The scale of the fallout is unprecedented, and small businesses are particularly hard hit. From restaurants to construction companies, the vast majority “require human interaction of some sort,” says Rob Einstein, a regional sales manager at U.S. Bank. “They are all being impacted by this.”

Despite the continued uncertainty, there are steps business owners can take to alleviate at least some of the hardship and worry. Below, Einstein breaks down how businesses can strategically prepare for the future.

Understand your expense structure.

If you haven’t already, Einstein recommends conducting a detailed analysis of your finances. Knowing exactly how each dollar is earned and where it’s spent is always a good idea, but “it’s more important in hard times,” he says. “Right now, it’s more important than ever.”

This includes doing a deep dive into all your revenue sources. Once you understand how money is coming in, you can plan for various scenarios in which individual channels are reduced or dry up altogether. Just as important is having a comprehensive understanding of your expense structure, including costs that are fixed versus those that are variable.

Run a stress test.

Once you have a solid grasp on your financials, Einstein recommends going on the offense by conducting a stress test. If you typically do a certain amount in sales, measure how your business will be impacted if that figure drops by 10 percent, 20 percent, and even 50 percent. How does the reduction impact your cash flow? And are there steps you can take to continue to operate even if revenue declines significantly?

Make contingency plans.

Given how quickly the economic climate is changing, Einstein advises that business owners plan for a number of different scenarios—an exercise that should include a clear-eyed understanding of how long your company could survive in each situation. Having a number of contingency plans outlined in advance allows “you to act versus react,” making quick decisions that could ultimately save your business. For example, is there a way you can adapt to serve clients virtually if stay-at-home orders persist? Many businesses that rely on in-person interactions have found that some of their services can be conducted remotely, if imperfectly.

Talk to your banker.

He or she will be able to help you navigate the continuously evolving relief landscape and advise you on a financial path that works best for your business. If you have a pre-existing relationship with someone at your bank, be it a relations manager or a business banking specialist, lean on them as a resource.

If you don’t, Einstein recommends reaching out to a branch manager at the bank where you do either your personal or small business banking. “They should be able help guide you in the right direction,” he says.

U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

Credit products are offered by U.S. Bank National Association. Equal Housing Lender. Deposit products are offered by U.S. Bank National Association. Member FDIC.

By: Entrepreneur Partner Studio Staff

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Tag: financialstrategies

Decentralized Finance Is on The Rise What You Need To Know in 2021

What is DeFi?

E-wallets are leveling up

Piecing it all together

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