[Investment Note] Investors who believe in blockchain rather than banks

News Article from ChosunBiz

What if you do not go through financial companies such as banks and securities companies when you normally do financial transactions? Maybe someone asks if you are already doing that when sending money to someone, like toss or Paypal, but if you think about it, you still need to have a debit card or bank account.

Illustrated by Ahn ByoungHyun

DeFi, an abbreviation of Decentralized Finance, emerged with the intention of overturning this situation. DeFi refers to finance based on blockchain or virtual currency without an intermediary financial company. In short, the role that the financial system has played in the past is being replaced by blockchain or virtual currency.

Recently, Forbes said, “There is hardly any way for consumers to directly access the capital markets or financial services today.” “DeFi wants to replace this with a peer-to-peer relationship,” they added.

For example, in the past, when a financial transaction was made, a record was left in an account owned and managed by a financial company, whereas in DeFi, a blockchain or virtual currency proves this transaction. DeFi advocates argue that financial transactions through DeFi are safer and more transparent than private financial systems.

Thanks to this support, the DeFi market continues to expand. According to the Korea Capital Market Research Institute, the global DeFi market size as of last month was $41.8 billion, an increase of 75 times from the previous year ($560 million). From loans to decentralized exchanges, asset management, and derivatives, there is a trend to diversify their application areas.

Hong Ji-yeon, a researcher at the Capital Market Research Institute, said, “DeFi companies have been established and serviced in Korea since 2019. “Delio has partnered with the cryptocurrency exchange Bithumb to provide loan and deposit services, and Big tech companies like Kakao and Naver are trying to expand into DeFi business through subsidiaries in charge of blockchain business. ”The growth of the DeFi market has nothing to do with the growing interest in various cryptocurrencies using blockchain technology. As institutional investors and companies who have turned their back on bitcoin buy bitcoin one by one, individual expectations about the possibility of incorporating cryptocurrency into institutional rights are in an atmosphere of amplification.

However, DeFi still has more mountains to overcome. Blockchain’s technical limitations or security issues are the biggest risks. DeFi relies solely on blockchain technology with no legal mechanism to take responsibility or guarantee. The more transactions there are, the slower the blockchain transaction speed can be, and the responsibility for security or operational accidents is unclear.

Researcher Hong said, “Possibility of strengthening regulations by governments can also be a risk factor.” It will affect the flow of the DeFi market in the future,” researcher added.

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