Hero's Image

DeFi Primer

Primers

In recent decades, the world has witnessed one of the greatest periods of economic growth in human history, and it is no exaggeration to say that capital markets played a fundamental role in that development. It is through a well-developed financial market that economic resources can be efficiently allocated, reaching the people, projects and companies that can bring the greatest value to society.

A key role of financial organization in this context is that of a trusted intermediary, an institution people trust to deposit their capital with the expectation that it will be deployed in a safe and prudent way. The progress this model has brought to society is undeniable, but it is not without drawbacks. Until recently, some degree of centralization was inevitable in an environment where trust is an essential attribute. After all, the largest and strongest institutions are likely to be the most in demand, attracting even more capital.

There are pitfalls in such concentration, however. As institutions grow larger, some relevant issues arise: operational complexity increases, reducing speed and flexibility; smaller clients may no longer be economically interesting, overlooked in comparison to larger and more profitable ones; and fees usually get higher, as market power increases. Additionally, there are no clear incentives for one institution to cooperate with their competitors, making the sector fragmented. In other words, the system becomes more costly and inefficient.

Now imagine that instead of having to rely on trusted intermediaries, we could establish a global, transparent, interoperable and — most of all — trustless network, in which we could transact, invest and manage our money in a completely decentralized way? That’s the innovation that Decentralized Finance (DeFi) brings to the global financial markets landscape.

Logo Hashdex
The material contained on this website is for informational purposes only and Hashdex, and its affiliates, is not soliciting any action based upon such material. The material is not to be construed as investment advice nor is it to be construed as recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Further, the material contained on this website does not constitute a representation that the financial instruments described therein are suitable or appropriate for any person. Past performance is not an indication of any future performance. Hashdex collects its data from public sources. Therefore, there is no liability for any delays or inaccuracies in the information due to the updating schedule of these sources. This website may contain advertising of financial products.