Kiffmeister’s FinTech Daily Digest (07/05/2020)

What Is DeFi and How Will It Impact Traditional Finance?
DeFi (decentralized finance) encompasses anything that provides loans, borrowing, staking or some reward to the user for putting in capital to the system. It removes all the layers of intermediaries and middlemen that would normally be involved through the use of smart contracts. The DeFi space remains heavily reliant on the Ethereum blockchain (which has famously struggled to scale to onboard mass users). However, once Ethereum transitions to ETH 2.0 using the Proof of Stake consensus mechanism, the number of users it can onboard will be potentially without limitation. Moreover, other serious contenders are further building out the space, such as Compound, and Maker DAO, propelling DeFi to more and more users.

Decentralized apps surged in June
Decentralized apps experienced a dramatic surge in activity in June 2020, led by a $500 million increase in DeFi protocol Compound’s balance sheet. Curve serves as an automated money market that can only support swaps between different stablecoins and “wrapped” cryptocurrency tokens. Curve can offer more competitive slippage and lower fees for trading virtual assets. Leading non-custodial exchange Uniswap also saw increased activity because of a dramatic rise in Compound’s COMP token trading volumes. Kyber Network, which connects fragmented tokenized assets by facilitating seamless transactions, and decentralized exchange protocol 0x also reported increased activity.

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