What Leaders Need To Know About DeFi

While leaders may  struggle to understand what’s happening in the crypto-verse, certain sectors are becoming too large to ignore. Sure, popular projects like Bitcoin (BTC) or Dogecoin (DOGE) seem to mark up media headlines. But, below these volatile waters, a revolution is happening, with significant implications for leaders. 

Decentralized finance (DeFi), for example, directly challenges traditional finance systems and our current global banking infrastructure – the way leaders typically fund transformation. A tall task indeed. But, with over $200 billion locked into DeFi protocols across multiple projects and blockchains, leaders looking to prosper in the Web3 future need to understand the powerful narrative behind this influx of capital, says Professor Vijay Pereira, Head of Department of People and Organisations, at NEOMA Business School, France. His new research argues that following BTC price increases, there’s a proliferation of cryptocurrencies, which have become a major method used by leaders doing business across national boundaries.

How DeFi is Already Making Waves

First, what’s DeFi anyway? Put quite simply, it’s taking traditional centralized finance systems, like banking, and developing decentralized alternatives with blockchain technology. The space covers about every Traditional Finance (TradFi) sector you can imagine.

Lending, derivatives trading, asset exchanges, borrowing, and payments happen without a centralized authority and on the blockchain. As a result, the space is diverse, and it’s seeing a steady flow of retail dollars and institutional capital.

The blockchain world moves fast. The total value locked (TVL) in DeFi projects rose from $13 billion in early 2021 to its present value at around $200 billion today. Moreover, the number of projects developing new and inventive DeFi technologies is skyrocketing. If leadership stayed on the sidelines for the crypto-insanity of the 2010s, it might have been for the best. With DeFi, though, the landscape is different. The sector is giving blockchain a powerful use-case, and it’s putting the tools of financial infrastructure in the hands of everyday people — and leaders should take note.

Augmenting the Platform — Swim Protocol and DeFi

As it stands, DeFi has a bit of an issue. That issue is Ethereum (ETH). If you don’t know, ETH is the second-largest cryptocurrency by market capitalization and is the preferred choice for DeFi projects and protocols — albeit with cost and throughput problems.

But that’s not the only platform that developers can build on. In fact, the crypto-verse has become a diverse set of other blockchains that can outperform ETH in many respects. This shift has put a new word in the mouths of thought-leaders in the industry — and that’s interoperability.

Projects on the bleeding edge of DeFi are fully aware of this future. Swim Protocol, a revolutionary asset bridging platform and auto market maker (AMM), is building on top of existing platforms, like Ethereum, to offer an easy, no-fuss way to engage with DeFi projects across multiple blockchains.

Swim Protocol augments the usability of digital platforms like Ethereum. However, if the complicated nature of blockchain represents a significant hurdle for everyday usability, Swim Protocol is breaking them down.

What Do Leaders Need to Know to Stay Relevant?

The platform sees its time in the sun as a rising prominent business model in tech. However, leaders now need to meet the growing demands of a diverse and connected customer base to stay relevant.

This kind of model sits in line with the overall philosophy of the DeFi space. Take Ethereum, for example. First, its usability rests in the projects and protocols built on the blockchain platform. Then, further down the line, the users who engage with these projects power the space. That’s the core of DeFi; wrestling the power of capital from the traditional finance infrastructure and giving it to the customer.

Projects like Swim Protocol make this task that much easier. Founder, and early member of Alameda Research, Troy Tsui sees current solutions for interoperability as “clunky and difficult” even for “the average DeFi retail user.”

Creating easy-to-use abstraction layers that shield users from the complex DeFi underbelly is the key to future success, concludes Pereira. “You don’t need to fully understand the ins and outs of each blockchain, DeFi and complicated processes like asset bridging to utilize these platforms anymore,” he says. Easy interaction is monumental, and some argue this is the stepping stone for mass adoption.

For leaders, keeping a watchful eye on the growth of this space is paramount to successfully navigating the future Web3 world. However, understanding the shifting tectonics of the tech-space is difficult, especially when blockchain is involved.

What’s becoming apparent is that the customer is no longer sidelined and forgotten; they’re in charge. The rise of the platform model is proving this thesis across huge industries, and DeFi and cryptocurrencies are the next leg of that journey. 

Leaders that are aware of this shift are quick to understand the true potential of these technologies. Through projects like Swim Protocol, the entrance into the DeFi world is becoming less stressful and more accessible even for crypto-neophytes. As a result, DeFi users can interact, engage and prosper in diverse financial ecosystems more than ever before. The draw? The control and the opportunities.

Users are no longer subject to the terms and conditions of a centralized authority. For example, even something as simple as a yield-bearing savings account is entirely different in the DeFi world. Instead of taking whatever interest your bank offers, you can leverage lending protocols to shop around for the best ROI on solid stablecoin assets that don’t fluctuate with the market. For some, this is a massive improvement over traditional finance opportunities.

Swim Protocol makes the on-ramp for these kinds of opportunities simple. Leaders still hanging onto the principles of centralization will lack the flexibility and adaptability needed to prosper in this new paradigm. It’s not to say that centralized entities will no longer exist; it’s that they will no longer be the standard. 

Is Decentralization the Future?

Swim Protocol, and the many other projects developing easy on-ramps and utilities for existing blockchain ecosystems, are building the future. Not just for DeFi, but the crypto-space as a whole.

It’s easy to knock this adolescent tech sector as being too idealistic. But the platform model proves that people are craving this kind of usability and freedom. Leaders can’t keep their heads in the sand for much longer. The easier it becomes to use blockchain technology, the more people will jump into new and revolutionary ways to connect, communicate, and earn.

Centralization has its benefits. But decentralization has a powerful narrative that isn’t going anywhere anytime soon. So leaders looking toward our digital future should keep a keen ear on the ground as projects like Swim Protocol develop. When the wave finally peaks, those prepped with the tools to succeed will prosper, and everyone else will be drowning in a sea of missed opportunities.