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DeFi Explained

What is DeFi

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 solutions that are build as a second layer on top of the Ethereum network, known as 'Layer Two' solutions. Layer Two solutions help increase efficiency and scalability and make the sector as a whole more accessible to everyone around the world.

Watch the video below to learn why DeFi is so important to the future of finance and the internet.

How DeFi Works

Decentralized Finance allows for financial interactions of all types to be governed by smart contracts. Development in decentralized finance is increasingly focused on Layer Two networks, which are faster, more efficient and more scalable.

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 the three areas of focus is to provide greater access to everyone around the world to parts of the financial markets that were previously rather inaccessible to most people.

Andrew Young, CEO of Layer 2 Blockchain, explains the opportunities in DeFi in the video below.

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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