Blockchain, Crypto and DeFi

Chapter 6Money Grows on Distributed Trees: The DeFi Forest of DAOs and DApps

Preface

Imagine the financial world as a vast, sprawling garden. Traditionally, this garden was meticulously curated by a select few gardeners (banks and financial institutions), who decided what would grow and where. Now, enter DeFi, a magical beanstalk sprouting in the midst of this well-ordered plot, reaching toward the sky with wild abandon, nurtured by the collective hands of internet denizens rather than the iron grip of the gardening elite. This isn’t just any beanstalk; it’s a vibrant ecosystem teeming with new forms of life (protocols, platforms, DAOs) that challenge the very nature of the financial flora below.

In this chapter, we’ll skip down the yellow brick road of DeFi, past the singing flowers of Aave and Compound, where your digital coins can bloom into interest-bearing blossoms or be staked as seeds for future growth. It’s a bit like lending money to a stranger on the internet, except here, smart contracts replace handshakes, and algorithms dictate the terms. But every enchanted garden has its peculiarities. Here, the flowers manage themselves through the mystical powers of smart contracts, and the bees (users) buzz from one bloom to another, cross-pollinating assets without the oversight of the head gardener.

DeFi beanstalk in the garden of finance

But what’s a revolution without ...