DeFi: A New Financial System Free of Systemic Control

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The parabolic growth of decentralized finance over the last few years shows that it is here to stay and restructure the whole financial system. Leveraging smart contracts, DeFi is transforming centralized financial models into trustless and transparent protocols. 

Further, it eliminates intermediaries, making protocols capital efficient and globally accessible. Yet, democratizing finance is only one element of DeFi’s macro vision. Its ultimate goal is to create a new financial system where users are in control and can access bank-like features without ever needing a bank account. 

In the past few years, the DeFi space has seen unprecedented growth across different blockchains, increasing the  TVL from just under a billion to over USD 200 billion. The massive influx of capital and resources has fast-tracked DeFi innovation, creating new market sectors capable of challenging traditional finance on multiple fronts. 

For example, the role of commercial banks in giving out loans, a core aspect of the financial system, is being fulfilled by lending and borrowing protocols with more efficiency, access, and transparency. 

Moreover, these protocols provide significantly high returns by integrating different DeFi techniques like staking, yield farming, and liquidity mining. A typical commercial bank gives a maximum of around 5%  interest on savings accounts, whereas DeFi protocols like Anchor can provide 20% with minimum risk. 

Another prominent area where DeFi shines is capital formation. With traditional financial instruments, companies go through a long process to raise capital, sacrificing a portion to third parties. However, in