Decentralized Finance Financial services that will change the world you know

When the world moves to digital in every dimension the financial system also changed to digital as well. Digital currency terminology like Cryptocurrency Bitcoin Blockchain began to talk widely. Including Decentralized Finance or DeFi is another new thing in the digital finance world to know. Hun Kasidej Phulsuksombati, Technical Lead SCB10X, and Khun Sukit Udomsirikul, Managing Director Head of Research, SCB Securities talk about DeFi and finance in the digital world.

What is DeFi? What is its origin?

Khun Kasidej or Khun Mike Explain that Decentralized Finance (DeFi) is based on cryptocurrency. That created bitcoin in 2008 by Satoshi Sakamoto. And the Bitcoin network was created in 2009. Developed to more than $ 1 billion in Bitcoins in 2011. And with cryptocurrency, other currencies occur in the market as new assets. The total value of $ 2.5 trillion. Mostly bitcoins, followed by Ethereum (ETH) and other currencies, but all are still relatively small compared to other assets such as debt securities, gold, and stocks.  

From the Wave 1 period where someone made a cryptocurrency, There are many currencies such as Bitcoin Monero etc. Each currency has different features. After having a currency, the second wave is to bring cryptocurrency. How to use the value to grow. Resulting in Decentralized Finance (DeFi), which is a financial service on the blockchain to support Cryptocurrency By various transactions Will not be processed through any intermediary (Decentralized). But will be processed via Smart Contract code that cannot be modified instead Users can check the Smart Contract code to see the transparency of transactions at all times. So just have the internet. Everyone can access DeFi services from every corner of the world.

Will the COVID-19 situation push DeFi to spread faster?

From Khun Mike view The COVD Crisis contributed to DeFi and Cryptocurrency are more prevalent. For example, if the US government prints more banknotes in order to solve the COVID crisis Resulting in more dollars in the system the dollar was weakening. Confidence in the currency also decreased accordingly. The situation of COVID makes people wonder about the monetary management of the relevant departments. It turns out that the current currency used by the currency control agencies is a disadvantage. And making Cryptocurrency money Like Bitcoin, etc. that does not have an organization to control the configuration Gaining more popularity. Like the inflation situation in Argentina, People lack confidence in the national currency and therefore turn to Cryptocurrency. The DAI that holds 1 DAI equals 1 USD * instead.


* Cryptocurrency There are both volatile prices such as Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), etc. and at fixed rates called Stablecoin, where values ​​are fixed to low-volatile assets such as DAIs. (1 DAI equals 1 USD) etc.

DeFi service that is already available

Khun Mike gives examples of DeFi services currently available to users, including Compound, MakerDAO, Uniswap, and PoolTogeter.

  • Compound: Deposit - loan services Cryptocurrency Currently, the Compound has valued the US $ 156 million in 1 year, growing 600% and lending $ 220 million

  • MakerDAO: Money Making Platform Cryptocurrency, DAI with a fixed value of 1 USD using Cryptocurrency Other currencies are guaranteed by MakerDAO, with a value of $ 675 million.

  • Uniswap: Money Exchange Service Cryptocurrency Without a middleman with a value of $ 43.6 million in the system

  • PoolTogether: GSB lottery service Cryptocurrency Which users can deposit DAI currency in the Pool in exchange for the lottery the system then deposited both Pool money and Compound, bringing interest as a reward. Every 7 days there will be a draw for 1 lucky person. Currently, the assets in the pool are $ 856,350. There are 6,853 people depositing in the pool.

Mr. Mike said of the advantages of DeFi that DeFi services are not controlled by the institution like the traditional financial system. By allowing the system to be in accordance with the market mechanism. The key principle of DeFi is trust and transparency. DeFi service works on Smart Contract, which is writing opensource code that is transparent and checkable. If any developer wants to write a Smart Contract code, they can write it straight away. It can be used by anyone. If people believe in Smart Contract that the developer wrote that it works correctly people will use it. If people don't believe it, no one will use it. DeFi is a system that can access and use worldwide without borders. And the important thing can bring various financial services Can be added to each other, such as PoolTogether, connecting with Compound.

Regarding the precaution of DeFi service, it is necessary to carefully study the details of the Smart Contract to use the service. If able to be reading the code is an advantage. Another way is to choose a service that has been assessed by a Smart Contract Auditor expert and looks at the number of money/users in that contract, and most importantly, can invest in at your own risk.

 DeFi's future

Khun Mike views that there are 3 factors that will make DeFi grow steadily: 1) The new generation will make DeFi born and grow Because they can access the internet and understand Cryptocurrency turned to Cryptocurrency and uses more DeFi services. 2) Monetary policy that encourages people to be able to Cryptocurrency Go to use more People will come to use the service. 3) The risk of using DeFi service, which Mike warns that if you see any new DeFi service, do not rush to use Wait for someone else before a while to make sure it's reliable. Khun Mike once again stressed that investing in acceptable risks.

It is exciting that in the future there will be development. Cryptocurrency and DeFi services continue to relentlesslyใ Which is truly a new dimension of finance in the digital age Come catch up with the financial world that will change from LIVE SCBTV. Opportunity in the crisis. Covid-19 Part 3: Decentralized Finance Financial services that will change the world you know.


Source: LIVE SCBTV, Opportunity in Crisis, Covid-19 Episode 3: Decentralized Finance, Financial Services that Will Change the World You Know, broadcast on Facebook SCB Thailand, 19 May 2020