What is DeFi?

by Nov 8, 2019Blog, Culture, Tech0 comments

In the past few months I’ve been to three conferences at which participates couldn’t agree on a definition of DeFi. 

Here’s an example, from a DeFi conference 😳

This sort of ambiguity won’t do, at least not in our context. 

Here at Graychain we talk about DeFi all the time. We analyze DeFi data, we build DeFi tools, and we publish reports that cover DeFi. Needless to say, we have a very clear understanding of what we mean by DeFi!

For us, 

DeFi includes any financial service that is not designed to require a central authority. 

That definition gives us a lot of latitude, but easily excludes any traditional financial that happens to process digital assets. In other words, we adhere to the “small tent” definition of DeFi, while acknowledging that true De(centralization) is aspirational. 

If DeFi is a spectrum, how do we decide when something is NOT DeFi?

  • If a service is regulated, it’s not DeFi.
  • If a service is not managed by a smart contract, it’s not DeFi. 

Simple. Now let’s look at some examples.

If Compound DeFi?

Yes. It’s globally accessible, doesn’t KYC, and can’t be shut down by any state regulator. The Compound service is encoded in smart contracts.

Is BlockFi Interest Account (BIA) DeFi?

No. BlockFi is regulated. 

Is Binance DEX DeFi?

Yes. Although Binance itself is regulated, its DEX isn’t

We are clearly focused on credit, which means that we work with projects / companies in the lending space. The biggest DeFi lenders are:

  • Compound,
  • Maker,
  • dY/dX, and 
  • nüo.

None of them are completely De(centralized), but they aspire to be, which is all we can expect at this point in history.


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