DeFi Digest, 2/23-3/2
It’s time to recap the latest developments in the world of decentralized finance. Blockchain applications continue to gain attention from mainstream finance, and current events like those rounded up below only lend momentum.
Here’s what you need to know about the latest in DeFi:
Lloyd’s of London has a new insurance policy for crypto assets.
In the event that you keep your BTC, ETH, or other digital assets stored in a hot wallet and should become the victim of theft, you’re going to wish you had this new kind of insurance policy. Lloyd’s of London will insure as little as £1,000 of digital assets against theft with a new policy that’s backed by a number of Lloyd’s insurers like TMK and Markel.
Someone wrote a DAI explainer after the popular stablecoin was conspicuously unmentioned at a British blockchain conference.
MakerDAO’s DAI accounts for a dominant majority of the total funds locked up in DeFi projects. So it was extremely unusual that the currency was completely missing from panels and conversations at the recent Northern Blockchain Conference in York. That’s why Monolith tasked themselves with writing up how DAI works and what it’s all about. The provocative title of the post suggests DAI could compete with the dollar!
The Bank for International Settlements is contemplating a central bank digital currency.
CBDCs are all the rage these days — the Bahamas and Sweden are already testing their own national currencies in pilot programs. Now the Bank for International Settlements is the latest to join this conversation, releasing a report that reveals the large financial institution has thought deeply about launching a cryptocurrency of its own.
Expect to see lots of “flash attacks” in the future.
Flash loans, also called “flash attacks,” are a rather technical gaming of blockchain technology that let a borrower figuratively freeze time to take out a loan. If that sounds dangerous and scary, you’re right! This maneuver has already been used successfully to steal money from exchanges by taking advantage of how blockchains work, and we can expect to see more of this happen down the road.
Cryptodollars are worth learning more about.
Imagine you had a number of types of “US dollars” to choose from, each with their own perks and drawbacks — this is pretty much exactly what decentralized stablecoins represent. They are a stable unit of currency worth one dollar each, yet different stablecoins offer different interest rates and capabilities. The rise of the cryptodollar is real, and you probably want to know what to consider when choosing a cryptodollar to rely on.
From prediction markets to insurance to asset management and beyond, a number of sectors are waking up to DeFi protocols.
It’s not that decentralized finance lets companies and institutions play a different game — it’s that it lets them play the same game they always have more effectively and efficiently. Check out this roundup of the likely (and unlikely) sectors finding useful applications for the variety of DeFi protocols available today.
Can DeFi help prevent financial crisis?
In a word, yes. By bringing unparalleled transparency and efficiency to how people and businesses transact around the world, there are a number of arguments that DeFi principles can push back against national banking problems like those recently seen in Iceland and Greece.
Compound introduced a new governance system.
It’s a staple of DeFi projects everywhere, and now Compound’s got it too — governance! The crypto company announced that it will replace its protocol administrator with community governance, meaning the users can suggest and implement changes to how Compound works without any input or reliance from the Compound team.
Here’s a clear outline for how DeFi should “grow up.”
Cryptocurrency at large is just ten years old, and it’s only within the last year or two that the phrase “decentralized finance” has emerged within that. It’s clear to observers and participants alike that this stuff is new, and that it needs to exit its “childhood” phase and grow up a bit before it’s going to see any worthwhile adoption. Taylor Monahan turned her ETHDenver presentation on this topic into an easy-to-read roadmap on how DeFi should come of age.