Why DeFi? DeFi doesn't care, DeFi doesn't judge.

Written by: Andre Cronje

Translated by: TechFlow

Before we delve into the details, why talk about finance in the first place?

Before any currency existed, barter was already in place. I raise chickens, you grow wheat. I give you chickens, you give me wheat. One year, my chickens didn't do well, but I still needed wheat, so I promised to give you more chickens next year. I owe you a favor (IOU).

Perhaps you don't need more chickens, but your neighbor does, so you can use this favor to exchange for something else. In its most basic form, this is currency, a standardized favor that anyone willing to accept it agrees has a certain value. Ultimately, we began using these favors to measure everything.

So now I have a bunch of favors, and I start to worry about being robbed. I need a safer place to store these favors. Thus, the first banks appeared (initially, churches kept records of these favors). A respected person in the community wanted to start a cattle farm, so he asked the church to lend him some favors to start his farm. The church agreed, but he needed to repay more favors than he borrowed, which is the interest he needed to pay. To protect these favors, this person needed to use the land contract he purchased as collateral. The community was grateful for storing favors in the bank because now they had more favors, and the respected person was grateful because this allowed him to start his business.

The core of finance has always been about empowerment and making idle assets work. At some point, due to fraud, crime, and the ever-evolving society, it became increasingly difficult to judge whether the person requesting funds was a "respected person." In today's almost dystopian world, we are all reduced to a credit score. A number that determines whether we are a good financial candidate. If you are new to the system, you are referred to as having a "thin file" in credit bureau terms, meaning there is not enough data to judge you, making it difficult for you to get a loan, even if you qualify, and the interest rates will be terrible. You also need to have an existing relationship.

This leads to the question of why we need decentralized finance (DeFi). DeFi doesn't care, DeFi doesn't judge.

Everyone is treated equally according to the rules of the system, and these rules are open and transparent for everyone to see. Traditional banks reject your mortgage application? You may not even know the reason. DeFi rejects your loan? You will know exactly why.

In addition to labor and goods, interest (or returns) is one of the purest forms of income. There will always be people needing funds to start new ventures, or someone encountering difficulties and just needing some help to get through tough times. This form of income is infinitely scalable and pure, it does not rely on any false incentives, or any external factors, it is simply a matter of supply and demand.

The next form is barter, going back to our first paragraph, I have chickens, you have wheat. In today's interconnected world, barter is still at the core of daily business, but finding a trading partner can be difficult, or finding what you want can be challenging. This is why general markets began to exist, a place where people gather weekly to buy and exchange goods. Automated market makers (AMMs) are a barter platform, just like in a market where you need to pay a small fee to sell your goods, in AMMs, providers charge a small fee. This is also a form of pure income (or returns). As long as there are people willing to trade, it can be infinitely expanded.

In DeFi, you don't need to be a qualified investor to participate in this market, you don't need to live in New York, you don't need to work on Wall Street, and there are no backroom deals or brokers, what you see is what you get.

Look at the world's seven largest industries:

• Life and health insurance

• Oil and gas

• Real estate

• Pension funds

• Car sales

• Direct insurance

• Commercial banks

These are the world's largest industries, and even though most people cannot participate, DeFi eliminates all of this, allowing anyone willing to try to participate. This may be the most important cornerstone of any economic growth. Everything else stems from this. Trade and lending are the cornerstones of all the above industries.

Of course, some versions are distorted by false incentives, inflated returns, and unsustainable income, but this is true for both traditional and decentralized versions. This does not fundamentally eliminate the beauty of pure, transparent, and fully democratized access.

DeFi is the core building block of a decentralized society, this is just the beginning, there is more to be done. Until the above seven industries are all on the chain, fully open, transparent, and accessible to everyone, we have more work to do.

All humanitarian efforts happen when we as a collective have enough to share. And having enough to share can only be achieved through DeFi.

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