Decentralized Finance (DeFi) has been growing exponentially since the summer of 2020. According to DeFi Pulse, the Total Value Locked (TVL) in DeFi protocols has reached 71.5 billion dollars, an impressive 8x growth from May 1st, 2020.
Although many of its advocates and most ardent supporters are inspired by a notion of limitless earning potential uncontrolled by governments, decentralization of financial products impacts the end users and human society more than just a higher return. It offers an open ecosystem that attracts the best entrepreneurs and developers to collectively promote growth and creativity. It also allows more people to participate in ranges of financial activities, from the most basic to the more sophisticated, due to a lower barrier of entry. For example, a person without nationality, therefore without a national ID or passport, would be able to open a savings account. This would otherwise be impossible with traditional financial institutions. A startup entrepreneur could launch a token to fundraise via a DeFi platform without having to go through complicated due diligence processes that could take months to complete and a large amount of pre-owned assets as collateral. Decentralized Finance offers the benefits of programmability, immutability, interoperability, transparency, permissionless and self-custody for a range of products and services that have traditionally been tightly controlled by a small group of powerful institutions. It also affords opportunities for people marginalized by states and traditional banking institutions to save, invest, and grow their businesses to support their lives and loved ones.
Yet, it is important to note that not everything in traditional banking serves to exclude part of the population from participating in the system. Some rules, regulations, and processes are in place to protect consumers from potential fraud and maintain sanity in the banking system. On the other hand, as decentralized finance has become more widespread, we have seen many DeFi projects either be exposed as ponzi schemes or simply fold without returning investors’ capital. In 2021, crypto investors lost over $2.8 billion in DeFi scams, hacks, and poorly planned projects. Without accountable entities to monitor the less understood aspects of crypto-related business operations like smart contracts, crypto rug pulls, while not always illegal, will continue.. With existing technical and legal infrastructure, intentional crypto scams are still challenging to track and prosecute. It stands to reason, then, that decentralized finance needs some overarching control to realize both the benefits of accessibility and user protection.
One approach to solving the tension between DeFi extremes and traditional finance is CeDeFi or Centralized Decentralized Finance, a combination of traditional centralized financial institutions with mature DeFi applications. It brings together the benefit of regulatory safeguards in traditional systems and the benefits of modern innovative financial infrastructure and products. The traditional financial institutions would embrace maturing DeFi applications by integrating them with their existing products to create blended CeDeFi offerings.
CeDeFi is exactly the approach being taken by Lightnet, who by working with Velo Labs and other companies in its ecosystem, is building a holistic integrated platform to operate financial transactions, from technology, licenses, compliances and regulators. Unlike many other Blockchain projects, we don’t aim to only be a tech enabler but a network of networks. We work with banks and other existing financial institutions to make sure we comply with traditional banking standards, while providing more transparent, faster and less costly technology to help these institutions serve their customers more efficiently.
While our project may initially focus on Cross Border Payments, we will ultimately provide more financial solutions across a wide spectrum of CeDeFi, as the world and regulators become more welcoming to the use of Blockchain and Cryptocurrency.
To achieve this goal, Lightnet, Velo Labs and two other companies in the same group – Evrynet and Inception – are working together to fulfill many types of Cross Border Payment needs for both retail and institutional users. While Lightnet and Inception are working on fiat, customer-facing platforms, Velo Labs and Evry are developing technologies and work flows to support on-chain crypto transactions. Each of the platforms will focus on either institutional or retail clients.
In the light of the recent merger, Evry products will now continue under Velo’s umbrella.
In the long run, the group of companies will create an ecosystem where all kinds of assets, fiat or crypto, can be transacted in one platform. These transactions will be recognized and regulated by established institutions for the protection of all users.
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