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DeFi disruptions

Panel discussion video of a few disruptive DeFi protocols (Lygon, Alchemix, Perpetual swap, Synthetix) followed by discussion question
(uplifting music) <v ->Welcome.</v> In this video we’re gonna talk DeFi disruptions. So Imon, you’re an economist and also a former finance professional, what are some of the protocols that you are seeing in DeFi that you find really interesting and how do they work? <v ->Hi Jason.</v> Well, before I joined the Hub, I used to work in CFD trading, that’s contracts for difference. The idea being is that if I want to trade a particular financial instrument, I can do so through a broker and a financial institution will take the trade on the other side. Now, of course the financial system is geared up for financial institutions to do that.
What really excites me in the DeFi space, is that you can trade perpetual swaps, or PUPS. Now these are future contracts that do not have an expiration date, they’re just continuously rolled over. So now if I want to trade, say I wanna speculate or hedge the price of a particular financial asset, I can do so, but this time the intermediary is a DeFi protocol. So I can go long, I can buy, I can trade with you on the other side, you go short, and we’re just trading through the protocol as an intermediary, not a big financial institution that takes a big hair cut. So one of these protocols that I really like is Synthetix.
Again, the idea is that it’s a variation on that theme, I can trade a cryptocurrency, a fair currency, a commodity.
I will get a sETH token in return. That sETH the token is pegged to the value of these financial assets, the price comes through an oracle, an agreed oracle that the protocol chooses to take its price feed from, something like Bloomberg or Reuters or Train Link, and then we can trade without the intermediary, and a beautiful thing about that protocol is there’s no slippage. So if the price feed says gold is $1,500, that’s the price that we will trade at. Another innovation that I see and that I like is actually in the blockchain space itself. So Bitcoin is a, let’s say transaction-based blockchain. Ethereum is a multi-purpose blockchain.
One that’s getting a bit of traction right now is Solana, which is a new blockchain that essentially aims to be the blockchain of marketplaces, the go-to venue for everyone to trade and discover the price, price discovery, essentially. <v ->That’s really exciting.</v> So in your view, in what way are these disruptive? Like, is this just sort of internet digital native versions of things that we already see in traditional finance, or C5 as we’ve been calling it here. Or are these actually bringing fundamentally new capabilities? And if so, how does that change things? <v ->Well, the initial alert of DeFi,</v> potentially you could say it as, “Oh, it’s just financial markets with a bit more transparency.”
But I think it goes beyond that. There are a lot of innovations that can occur because of the nature of DeFi itself. So, one that I particularly like is Alchemix. The idea is you take a loan, you put in collateral and that collateral is, the protocol puts that collateral to work, earning interest. That interest is used to pay off your loan. Now, the alchemy is, you’re both the borrower and lender it’s a self-paying loan. Now, these are the kind of innovations that go beyond just replicating financial markets. And financial markets, traditionally institutions, dictate access, whereas a DeFi, access is anyone with a mobile phone and this opens the door to access from poorer countries.
And it’s this democratization of finance, I think has huge potential. <v ->Brilliant, thank you Imon.</v> <v ->Thanks, Jason.</v> (uplifting music)

One of the exciting things about DeFi is how disruptive it is to traditional financial markets. Watch as Professor Jason Potts discusses some of these disruptions with Dr. Imon Palit.

Now it’s your turn

This conversation introduces some exciting DeFi disruptions. How else could DeFi disrupt the financial sector? What other sectors might it disrupt? Share your thoughts in the comments.

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Decentralised Finance: Blockchain, Ethereum, and The Future of Banking

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