DeFi and You
Among the themes that defined the cryptocurrency industry in 2020, the growth of a movement called DeFi, or Decentralized Finance, was defining. Explanatory articles about this movement aimed at the average, non-crypto person date back to 2017.
To summarize these articles, we can call DeFi the general movement towards replicating the services and constructs of traditional finance, without a centralized authority controlling them, such that anyone with internet connection and a medium like a smartphone can access them.
In our view, the commonly-heard messages of censorship resistance and anonymity are only part of the story. We instead emphasize that in everyday DeFi, where the blockchain essentially replaces the API feed (the “order feed”) between your wallet and protocol, intermediary fees are gone. And although blockchain and protocol fees exist, with the right scaling and ecosystem growth, the DeFi model proves far more cheaper and efficient than traditional applications.
DeFi is not some opaque project exclusive to crypto-nerds and tech junkies. Rather, we believe that ignoring this trend is a huge opportunity cost for the average citizen.
Already, in the DeFi space, pioneers are shaping the first decentralized borrow-lending desks, exchanges, pools, and structured products. As of today, there is more than $20B in total value locked in DeFi. Aave and Compound alone (borrow-lending protocols) have over $3B in total assets under management, having grown 20x since this summer. Discussion of tokenization for traditional finance rails is emerging.
A quick look at the Defipulse rankings reveals the largest players and most prominent types of projects. Maker, Compound, and Aave for borrow-lending; Uniswap, Sushiswap, and Balancer for DEX’s; Synthetix for exposure to real world assets without requiring participants to hold the actual underlying.
The fundamental puzzle pieces (financial ‘primitives’) are coming to place. What does this mean for those interested in generating yield from lending, borrowing, or leveraged trading in the crypto and physical spaces? Where does a project like Oxygen Protocol, and its surrounding ecosystem, fit into all of this?
DeFi’s Current Challenges and Solana as a Powerful Solution
So far, hopping onboard a DeFi protocol, whether it’s a prime brokerage protocol or another sophisticated offering, is far from peaches and cream.
Transactions on current protocols can cost upwards of 10’s of dollars, defeating the purpose of commonplace transactions. Furthermore, transaction speeds (blockchain speed) can be capped to around 15 transactions per second (TPS) for the most popular smart contract blockchain, Ethereum, causing holdups. In plainer English, DeFi has temporarily hit a wall when it comes to supporting large-scale, ambitious financial services projects.
(For quick reference, Visa handles a peak of 65,000 TPS globally. We would also like to express our deep respect for the Ethereum community, projects, and those pioneers who have built out the first set of DeFi financial primitives.)
But let’s think historically. Before Robinhood, for example, there was the older Schwab model. And today, we have diverse players coming into the budding DeFi ecosystem to innovate beyond the current limitations of ‘old-school Ethereum’.
This is already happening across the broader blockchain community. Without tooting our own horn too hard, we point to our blockchain partner, Solana — a relatively new entrant blockchain with transaction costs of $0.00001 and support for 50,000 TPS (with a blocktime of 400 ms), and plans to scale these specs to boot.
Removing the jargon: cheap and fast support for the transactions of a mass worldwide audience is already here.
The pieces are coming together for powerful services like prime brokerage offerings to reach your own hands and wallet. And don’t forget other popular projects like stablecoins, prediction markets, decentralized exchanges, no-loss savings games, synthetic assets, and much more.
The last missing ingredient is customer adoption, for reasons of liquidity and network effects. The last piece of the puzzle is, quite literally, you.
What DeFi means for Prime Brokerages like Oxygen
An example of a decentralized prime brokerage protocol is Oxygen Protocol, catered exactly to the needs of DeFi users and the ecosystem.
Oxygen is built around Pools, or baskets of assets that can take collective actions. And as a DeFi app, Oxygen is permissionless, cheap, and scalable, making it a serious contender to democratize and make efficient prime brokerage services like borrow-lending for all.
Finance-heads might feel their cogs turning now.
A borrow-lending protocol, after all, is just the beginning — a keystone primitive to recreate the business units found within investment banks, from volatility trading to synthetic exposure. And now, such offerings are accessible to everyone and are all on-chain. And since DeFi’s composability property means that new DeFi projects automatically integrate with every other project as if it were native, Oxygen represents a larger ambition shared by decentralized projects like Serum — an ambition to revolutionize our current model of finance to one that is more accessible, fair, and powerful than once imaginable.
We invite you to try out Oxygen and to check out what’s happening in the Serum ecosystem. There’s much to explore.
Website: https://oxygen.org
Twitter: https://twitter.com/oxygen_protocol
Telegram community: https://t.me/oxygen_protocol
