It’s no secret that our global financial system is broken, if not shattered. The power currently rests in the greasy palms of just a handful of institutions. For centuries this corrupt brotherhood has dictated the movement of global fiat transactions. Having enticed us into their monetary system, which they then perverted with the introduction of fractional reserve banking, this cartel decides when, where and if you can access your money. They decide who gets a loan, who’s eligible for insurance and much more, it seems their insidious grip knows no bounds. This is an alarming level of control in itself, but what’s worse is that billions of people around the world do not even have the luxury of these services. The ‘unbanked’ as they’re known, have endured this fate long enough. However, a community choice proposal looks to shape the theme of Fund5, and be the catalyst that supports the effort in disrupting it all.
A $25 Billion Incentive
The DeFi revolution will provide financial freedom to anyone, anywhere in the world. All they’ll need is a smartphone and internet connection. The goal here is to encourage DeFi teams to build open finance solutions (dapps) on the Cardano Blockchain. The operational purpose of these dapps is to remove the middle man (banks) from the equation, while providing trustless access to the same financial services currently in existence. Consider the fact that these services have a total value locked (TVL) at $25billion and the incentive is clear.
Vanishing into the Ether
So, what’s the problem? Well, currently the vast majority of DeFi dapps in implementation are on the Ethereum blockchain. However, due to congestion and obscenely high gas (transaction) fees, the use of DeFi has become increasingly elitist. Ironically, this has led to the exclusion of the people who could use it the most. A simple Ethereum transaction between two tokens can cost more than $10. A more complex transaction, requiring more space in blocks can surpass a ridiculous $100. When a significant portion of your money quite literally vanishes into the ether, the platform is no longer sustainable. While Ethereum 2.0 continues to dawdle, other solutions are being developed. Some involve the use of a second layer in Ethereum 1.0 (Zk rollups, Optimistic rollups, Plasma etc). Others involve the creation of DeFi in other blockchains, such as Cosmos, Polkadot and more. However, unfortunately for these platforms, they now find themselves up against Cardano.
The Future of DeFi and Cardano
It’s necessary when discussing DeFi to delve a bit deeper, and when this happens it unveils the concept of composability. Composability is a system design principle that deals with the inter-relationships of components and allows for the rapid iteration of products. For example, in terms of crypto, allowing multiple smart contracts of different dapps and/or protocols to interact with each other. This concept is often referred to as ‘DeFi Legos’, an analogy to the LEGO building block toy. In this analogy, each dapp / protocol would be a lego block. The combination of these can leverage DeFi, creating more options, services and liquidity, among other benefits. Yet it can also leverage risks from poorly programmed, unaudited contracts. Imagine that the primordial dapps were at the base of a pyramid, and the more complex ones were built on top. The problem is that the money LEGOS composability brings systematic problems, exacerbated by the problems caused by the absence of code with formal verification. This is what makes Cardano the perfect platform for critical applications, such as Defi apps.
The Implications are Almost Beyond Comprehension
In addition to the advantage of having a functional language and portability with KEVM, DeFi Prime still has MARLOWE, which should facilitate the onboarding of people without technical programming knowledge, as well as ATALA PRISM, which will help onboard people without identity documents or a credit score. The positive implications for this are almost beyond comprehension, it’s no wonder the current financial oligarchy is worried.
A Brighter, More Inclusive World
The disparity between haves and have nots has deteriorated from a blemish into an almost permanent scar, but change is nearly here. Lower transaction fees, tokens, smart contract security, and above all, community power. It’s these factors that could ensure Cardano leads the way, on its momentous quest for a brighter, more inclusive world.
If you’d like to know more information or have questions/comments regarding the Scale-UP Cardano’s DeFi proposal, check out the link provided: