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What’s Defi And Is It Worth It? Decentralized Finance Explained – ReadWrite A comprehensive guide to decentralized finance



What is DeFI?

In a world where centralized finance is struggling, decentralized economics is taking the reins. Also known as DeFi, this exciting new development is made up of a variety of applications that run on top of blockchain technology.

These applications aim to take control away from third-party intermediaries and put it back into the hands of users. In this way, DeFi could help to solve poignant problems that have arisen in traditional finance. But what is DeFi crypto? And is it worth your time? (especially amid the crypto craze when everyone seems to invest in such projects).

Let’s weigh in on hype vs value.

The Basics of Decentralized Finance

Decentralized finance, or DeFi for short, is an umbrella term for a set of projects that aim to bring financial services to the blockchain era. This includes decentralized exchanges, margin trading, prediction markets, and stablecoins. DeFi has seen a lot of growth in recent months, with over $75 billion worth of value locked in DeFi contracts at the time of writing.

Unlike centralized institutions, DeFi offers its users a fluid and global financial system that has no intermediaries, transaction fees, or long authentification procedures. Instead, DeFi participants enter into a “smart contract,” a self-executing code that automatically monitors whether the terms of the agreement between buyer and seller are met.

Moreover, the spike of interest in decentralized finance can be attributed to a few other factors:

  • The ease of use and accessibility of DeFi applications
  • No intermediaries to create a more fair financial system and reduce fees
  • No single point of failure translates into added security
  • Faster application development
  • All transactions are visible and transparent to the whole network

What Can You Do With DeFi?

Being a broad notion, decentralized finance encompasses a whole range of applications – from decentralized exchanges to lending protocols. DeFi is still in its early days, but there are already a wealth of trailblazing projects being built on top of various blockchains. Let’s take a look at some of the possibilities that DeFi offers and what kind of operations you can handle within this ecosystem.

Decentralized borrowing and lending

Imagine stepping into a free finance universe, where no rechecks are done for approving your loans. This is exactly what DeFi borrowing is about. Just like centralized institutions, the DeFi lending protocol allows you to borrow assets. But instead of physical financial resources, you can secure a crypto loan in mere minutes. In doing so, you don’t need any third-party involvement, since the lending process is carried out through peer-to-peer lending.

Compound is a prominent example of a blockchain-based protocol that allows users to lend and borrow crypto against any other supported asset as collateral. Decentralized lending also gave birth to another crypto-related practice called yield farming. In this case, lenders borrow their assets and get rewards in the form of interest.


Decentralized exchanges or DEXs are the main destinations for blockchain-based trading operations. As such, DEX is a platform for trading digital assets directly between participants (P2P) with no third-party involvement or partial transfer of control over the assets. According to Statista, Uniswap and Sushiswap are the largest DeFi cryptocurrency exchange that accounts for the lion’s market share. Uniswap also allows users to add new tokens for trading.

DeFi derivatives

It should come as no surprise that derivative contracts are gaining traction in cryptofinance markets, given their role in mature, traditional financial systems. DeFi derivatives and protocols are generating a lot of buzz and are quickly becoming equally essential in crypto finance.

Synthetix, for example, is one of the most established protocols in DeFi derivatives. This collateral pool model allows users to exchange some synthetic assets for other assets directly through a smart contract, without the need for a counterparty. This mechanism solves the liquidity and slippage problems inherent in decentralized exchanges.

This set of operations also translates into a bunch of unique DeFi applications that come with one-of-a-kind opportunities for DeFi participants. Let’s have a closer look at these.

What Are The Most Popular DeFi Applications?

There are a lot of ground-breaking projects taking place in the DeFi space. Yet, I have curated one of the widely-known ones and dumped them into a succinct list that includes:

  • Decentralized Exchanges (DEX)
  • Stablecoins
  • Lending platforms
  • Prediction markets
  • Wrapped bitcoins


Decentralized exchanges are peer-to-peer marketplaces that serve as an alternative to traditional currency exchange points in CeFi. The core difference is that they don’t have intermediaries to monitor the transaction, yet are fraud-free due to their blockchain nature. DEXs allow users to swap one currency for another, including USD to crypto transactions.


These are cryptocurrencies that peg their market value to a relatively stable underlying asset. The latter can include paper money (fiat assets) or other cryptocurrencies. Their value can also be tied to gold or oil. Stablecoin exchange rates are subject to fewer fluctuations than typical cryptocurrencies. Tether is the most popular stablecoin.

Credit Platforms

As I’ve already touched upon lending DeFi platforms, these allow users to take out a crypto loan. But instead of going through a long-run and meticulous approval process, DeFi participants are eligible for crypto loans without the use of intermediaries. As collateral, users should deposit crypto or fiat assets. While lenders receive their money back with interest, borrowers get their collateral back after repayment.

Prediction markets

Decentralized prediction markets on the blockchain are exchange-trading betting venues that allow users to cash on their ability to forecast future outcomes. DeFi prediction markets allow everyone regardless of their status or location to bet on an event. In this case, the betting process is facilitated through the use of smart contracts.

Wrapped bitcoins (WBTC)

Wrapped bitcoins are DeFi-specific ERC20 token backed 1:1 with Bitcoin. As such, it is an Ethereum token that represents bitcoin (BTC) in the Ethereum blockchain. It is not bitcoin itself, but a separate ERC-20 standard token designed to track the value of bitcoin in the Ethereum ecosystem.

What Are The Main Disadvantages of DeFi?

Accessibility, ease of use, secured transactions, and no chargeback make DeFi a tempting opportunity. However, just like with any other young technology, decentralized finance is subject to some downsides.

Requires third-party audit

Smart contracts, which are the foundation for DeFi, can be susceptible to exploits. To avoid fraudulent manipulations, the code shouldn’t have any grey zones. Therefore, before being rolled out into the blockchain, a smart contract should be closely examined for possible vulnerabilities. Also mind, that once on the mainnet, the immutable nature of blockchain doesn’t allow a smart contract to be changed.


All marketable assets, including cryptocurrencies, require liquidity. Low liquidity indicates that market volatility is present, resulting in price surges in cryptocurrencies. And although most DeFi projects are touted as having high liquidity, there are still no surefire guarantees.


Anonymity is a two-edged sword in the DeFi market that can both bring unrivaled boons and painful surprises. Just like ordinary users, malicious actors can also benefit from the anonymity factor to remain unnoticed. Therefore, added security can also encourage malpractices and malicious manipulations.


Blockchain as a whole is well renowned for its limited scalability options. DeFi scalability is directly related to the ability to support high transactional throughput and future growth. Although DeFi applications can be scaled, added traction can compromise the security or decentralization nature of DeFi.

Yet, despite some evident stumbling blocks, the trade-offs are acceptable to unlock a bunch of unique opportunities of crypto and blockchain.

Thus, DeFi solves the following problems of traditional banking:

  • Inefficiency – centralized transactions are costly, slow, and insecure.
  • Low accessibility of banks – around 1.7 billion adults remain unbanked.
  • Opacity – limited or no transparency since centralized institutions hide their risk exposure from the public.
  • Centralized control – an oligopolistic system that imposes high fees.

The Hottest Ticket In Cryptocurrencies

DeFi is an open and global financial system meant for the digital era. Instead of opaque, legacy, and highly centralized banking, DeFi allows you to regain control and visibility of your assets.

Yet, as any fresh-baked technology, decentralized financial systems need polishing in terms of a safer infrastructure (vulnerability-free smart contracts) and scalability. So what’s the verdict?

DeFi enables investors to gain access to new asset kinds, lower costs, enhanced rates, and gain a greater sense of control over their financial future. Yet, you should pay due diligence to consider possible risks and distinguish between long-term DeFi platforms and cash grabs. If you’re looking to launch your own DeFi application, make sure you perform an exhaustive audit to guard against possible frauds.

Pavel Tantsiura

Generating billions of value for our customers by building products people love.


Fintech Kennek raises $12.5M seed round to digitize lending



Google eyed for $2 billion Anthropic deal after major Amazon play

London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

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Fortune 500’s race for generative AI breakthroughs



Deanna Ritchie

As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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UK seizes web3 opportunity simplifying crypto regulations



Deanna Ritchie

As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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