AC New Article: Why DeFi is the Key to the Future?
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AC New Article: Why DeFi is the Key to the Future?
Why do we need DeFi? DeFi doesn't care, DeFi doesn't judge.
Navigating Web3 tides with focused insightsWritten by: Andre Cronje
Translated by: TechFlow
Before we dive in, why talk about finance at all?
Prior to the existence of any currency, there was barter. I raise chickens, you grow wheat. I give you a chicken, you give me wheat. One year, my chickens don’t do so well, but I still need wheat, so I promise to give you more chickens next year. I owe you an IOU.
Perhaps you don’t need more chickens, but your neighbor does, so you can trade that IOU for something else. At its most basic form, this is money—standardized IOUs that anyone willing to accept them agrees have a set value. Eventually, we begin measuring everything in these IOUs.
Now I have a stack of IOUs and start worrying about being robbed, so I need a safer place to store them. Thus, the first banks emerge (initially churches keeping ledgers of these IOUs). A respected member of the community wants to start raising cattle and asks the church to lend him some IOUs to launch his farm. The church agrees, but he must repay more than he borrowed—this is interest. To secure the loan, he must pledge the deed to the land he purchases as collateral. The community members storing their IOUs in the bank feel grateful, as they now earn more IOUs; the respected individual is also grateful, as this enables him to start his enterprise.
The core of finance has always been about empowerment and putting idle assets to work. At some point, due to fraud, crime, and evolving societies, it became increasingly difficult to judge whether someone requesting funds was truly a "respected person." In today’s near-dystopian world, we’ve all been reduced to a credit score—a number that determines whether we’re considered good financial candidates. If you're new to the system, credit bureaus label you as “thin file,” meaning there isn't enough data to assess you, making it hard to get loans—and even if you qualify, the interest rates are terrible. You also need an existing relationship.
This brings us to why decentralized finance (DeFi) exists. DeFi doesn’t care. DeFi doesn’t judge.
Everyone is treated equally under the system’s rules, which are public and transparent for all to see. A traditional bank rejects your mortgage application? You might not even know why. DeFi rejects your loan? You’ll know exactly why.
Beyond labor and goods, interest (or yield) is one of the purest forms of income. There will always be people needing funds to start new ventures, or those facing hardship who just need help getting through winter. This form of income is infinitely scalable and pure—it doesn’t rely on artificial incentives or external factors. It's simply supply and demand.
The next form is barter, returning to our opening story—I have chickens, you have wheat. In today’s interconnected world, barter remains central to daily business, but finding counterparties or desired items can be difficult. That’s why general markets emerged—a weekly gathering place to buy, sell, and exchange goods. An automated market maker (AMM) is a barter platform. Just like paying a small fee to sell goods at a market, providers in an AMM charge a small fee. This too is a pure form of income (or yield). As long as people want to trade, it scales infinitely.
In DeFi, you don’t need to be an accredited investor to participate in this market. You don’t need to live in New York, work on Wall Street, or have backroom deals or brokers. What you see is what you get.
Consider the world’s seven largest industries:
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Life and health insurance
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Oil and gas
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Real estate
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Pension funds
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Automotive sales
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Direct insurance
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Commercial banking
These are the largest industries globally, yet most people cannot participate. DeFi removes all such barriers—anyone willing to try can join. This could be the most important cornerstone of any economic growth. Everything else stems from this. Trade and lending are the foundation of all the above.
Certainly, some versions are distorted by false incentives, inflated yields, and unsustainable returns—but this is true for both traditional and decentralized systems alike. That doesn’t fundamentally negate the beauty of pure, transparent, and fully democratized access.
DeFi is a core building block of a decentralized society. This is only the beginning—we still have much more to do. We won’t be finished until all seven of the above industries are on-chain, fully open, transparent, and accessible to everyone.
All humanitarian efforts happen when, as a collective, we have enough to share. And having enough to share can only be achieved through DeFi.
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@AndreCronjeTech
