| Wednesday, 23 March 2022 |
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Good morning [%first_name |Dear Reader%],
Welcome to this week’s edition of Tokenised.
The fire of the 2008 subprime financial crisis may have been sparked by bad home loans, but it went from being a thicket fire to a wildfire all thanks to financial derivatives that allowed investors to make large bets with borrowed money. And while regulations to contain such fires have now been enforced when it comes to traditional financial markets, crypto-powered decentralised (and unregulated) finance (DeFi) may be playing with the same kind of kindling.
Let’s jump right in.
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Decentralised Finance: Shadow banking with a new name?
At the most basic level, decentralised finance (DeFi) is an umbrella term for all financial services that use tokens and coins and software that operates on top of a distributed ledger.
While a specific definition for DeFi is hard to nail down given the ambiguity in its use cases, its current applications have certainly lagged behind the aspirations of its proponents who wish to build a non-intermediated financial system from scratch.
