(March 2021)
Crypto and other Fintechs have blown up in mainstream popularity in the last couple of years, but Mark Cuban sees another Fintech just over the horizon, DeFi. Decentralized Finance, or DeFi, is the process of borrowing and lending money via a cryptocurrency. Rather than provide physical collateral, investors use other cryptocurrencies as collateral, and interest rates aren’t pegged to a bank but rather the market fluctuations of cryptocurrencies. This allows lenders to extract the interest a bank normally would and prevents borrowers from paying hefty bank fees. Cuban sees DeFi as reducing friction in banking. However, DeFi has its risks: there isn’t any deposit insurance and lenders or borrowers could lose depending on exchange rates. This risk will earn lenders higher returns than traditional lending routes.(Silicon Valley)
FINSUM + Magnifi: DeFi is one of the latest Fintech developments and could be a game-changer in the world of alternative finance.
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