Federal Reserve Bank Says DeFi Could Cause Massive Paradigm Shift In Financial Industry

Few can deny the impact that DeFi (decentralized finance) has had on the financial world, with many who were previously opposed to the idea slowly coming to realize that it may actually have its uses after all. Cryptocurrencies have understandably played a big part in this, with users all over the world buying, selling, and investing in all kinds of cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, Binance Coin, and more.

But in this article, we will be observing the key innovation that Ethereum has managed to bring forth as of late. ETH’s current price is $3,259, which is a 3.9% decrease since yesterday. Nevertheless, we will analyze Ethereum’s part in the rapid expansion of DeFi. The research conducted on this topic had mainly been attributed to Dr. Fabian Schar and was published just a few days ago, on the 2nd of May 2021. It mainly highlighted that should the various security-related risks and concerns be appropriately addressed. Then we could very well see big changes in the world of global finance in the near future.

‘DeFi can help increase transparency,’ says Schar

Dr. Schar had claimed that decentralized finance often utilizes smart contracts in an effort to form protocols that can replicate any and all financial services which may already exist in a much more interoperable, open as well as transparent manner. Dr. Schar added that DeFi is accessible, robust, efficient, and has composability and that it could indeed result in a big paradigm shift for the entire financial landscape.

This claim certainly has merit, as the growth that DeFi has experienced since 2020 had been about an increase of 700% in terms of the overall value, which was locked around the ecosystem. Right now, this figure would roughly translate to about $134 billion. Furthermore, Ethereum plays a vital part in this success as most smart contracts run on it, and these smart contracts form the basis of the whole DeFi infrastructure. Of course, other tokens do play a role in this as well, but none seem to contribute as much as Ethereum.

DeFi becoming increasingly relevant

Schar had further argued that Ethereum’s constant innovation had resulted in the entire blockchain landscape becoming more technologically advanced, which only served to increase DeFI’s popularity.

He concluded that due to the outstanding growth of the various digital assets and blockchain technologies, DeFi might be relevant in ways previously unthought-of, as researchers, government officials, policymakers, and various financial organizations would all want to get involved, and that is exactly what is happening nowadays.

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