Powering Through Post-Pandemic Economy: The DeFi Way
In recent years, the world has been turned upside down by the Covid-19 pandemic. Millions of people have lost their jobs, businesses have closed their doors, and the global economy has taken a severe hit. In response, many governments and organizations have turned to digital technologies to help restart their economies. However, these digital solutions are often centralized and controlled by a few powerful entities.
Decentralized finance, or “DeFi”, offers a new way forward. By its very nature, DeFi is open and accessible to anyone with an Internet connection. And because it runs on decentralized infrastructure such as blockchain, DeFi is much more resilient to disruptions than traditional financial systems.
DeFi is a rapidly growing sector of the cryptocurrency industry that is built on the Ethereum blockchain. It enables users to borrow, lend, trade, and invest in a wide variety of assets without having to go through traditional financial institutions.
The current economic crisis has highlighted the need for a more sustainable and resilient economy. And DeFi could be the key to kick starting this new economy.
Here’s how:
1. DeFi can help to provide financial inclusion.
The COVID-19 pandemic has disproportionately affected low-income households and individuals. In the United States, for example, nearly 30% of adults say they have lost work or income due to the pandemic.
DeFi can help to mitigate these effects by providing access to financial services for those who may not have traditional banking relationships. For instance, decentralized exchanges (DEXes) can offer a way to trade cryptocurrencies without having to go through a central authority. This is important because it gives everyone — regardless of income level — a way to participate in the digital economy.
2. DeFi can help to stabilize local economies.
The economic downturn caused by the pandemic has been felt around the world. And in many cases, the most vulnerable members of society have borne the brunt of the damage.
DeFi can help to stabilize local economies by providing a way for people to pool their resources and access credit. For example, MakerDAO’s decentralized lending platform offers loans in Dai, a stablecoin that is pegged to the US dollar. This means that borrowers can take out loans without having to worry about fluctuating exchange rates.
3. DeFi can help to create new jobs.
The COVID-19 pandemic has led to widespread job losses. In the United States alone, nearly 30 million people have filed for unemployment benefits since mid-March 2020.
DeFi can help to create new jobs by providing opportunities for people to work on decentralized infrastructure projects. For example, the Ethereum Foundation’s ETH2.0 project is looking for developers to help build the next version of the Ethereum blockchain. This is a great opportunity for those who have lost their jobs due to the pandemic.
4. DeFi can help to fund social welfare programs.
The COVID-19 pandemic has put a strain on social welfare programs around the world. In the United States, for example, food banks are reporting unprecedented levels of need.
DeFi can help to fund social welfare programs by providing a way for people to donate money or other assets without having to go through a central authority. For instance, the Ethereum-based donation platform Giveth enables donors to send money directly to charities and other organizations. This is a much more efficient way to donate than traditional methods, such as writing a check or making a credit card payment.
5. DeFi can help to fight corruption.
The COVID-19 pandemic has highlighted the need for transparency in the use of public funds. In many countries, corrupt officials have used the pandemic as an opportunity to line their own pockets.
DeFi can help to fight corruption by providing a way for people to track how their money is being used. For example, the Ethereum-based platform Aragon enables organizations to manage their finances in a transparent and decentralized manner. This means that everyone — including donors and beneficiaries — can see how the money is being spent.
The Bottom Line
The post-pandemic economy will be defined by a new wave of digital innovation, and DeFi is poised to lead the charge. By enabling decentralized exchanges, lending platforms, and other financial services, DeFi can provide the infrastructure for a more equitable and sustainable economy. In a world where traditional financial institutions have failed to meet the needs of many, DeFi can provide access to essential financial services for all. With its ability to harness the power of blockchain technology, DeFi can help build a fairer, more inclusive economy that benefits us all.
As we enter a new era of economic recovery, it is clear that DeFi will play a pivotal role in rebuilding our global economy. With its ability to provide inclusive access to financial services, DeFi can help us create a more sustainable and equitable economy for all.
