Crypto News

The future doesn’t look like Robinhood

Disgust over GameStop’s trading shutdown will accelerate DeFi adoption. Here’s how to gain DeFi investment exposure.

Last week’s frenzy around GameStop’s stock (GME) and firestorm over Robinhood’s trading shutdown laid bare real problems with our existing market infrastructure and its lack of transparency.

These problems (which are nothing new, just more widely apparent) are part of what historically inspired the creation of Decentralized Finance (DeFi).

A near perfect advertisement for DeFi

The DeFi network of trust-minimized smart contracts on open blockchain networks provide financial services that, until now, were reliant on centralized counterparties like Wall Street clearinghouses.

In contrast to DeFi infrastructure, traditional Wall Street clearinghouses represent centralized points of control and potentially catastrophic failure risk.

While the GameStop/Robinhood blame games continues and will likely wind its way to Congress, the bottom line is already clear: traditional market infrastructure failed and outrage over sudden, inequitable trading stoppages in shares like GameStop is warranted.

DeFi’s promise and inevitability

Perhaps one day publicly traded companies may issue their shares in a blockchain native format that can freely ride DeFi’s censorship resistant rails. Already the groundwork and for tokenized equities is being laid.

In such a world, you might be able to self custody your digitized shares of a company and switch exchanges near instantly to stay nimble in a global market. Imagine if you could send, store or trade a stock in the same way you could exchange a bitcoin.

Once imagined, it is hard to unsee the inevitability of our future financial system built around DeFi.

A lot needs to happen before the vision for DeFi is fully realized. Right now DeFi does not by and large offer a way to trade as simply as you would on a traditional centralized exchange.

But already today DeFi protocols are not subject to “unsporting” (to be polite) centralized trading shutdowns (aka “getting rugged”) like we saw with Robinhood last week, and again with CashApp this week.

Further, DeFi presents an investment opportunity for everyone, not just institutional and accredited investors.

How to gain investment exposure to DeFi growth

DeFi protocols have native cryptoassets that reward users for contributing meaningfully to the market and its infrastructure. Two promising DeFi protocol tokens are listed on Blockchain.com’s exchange:

About Aave (AAVE)

Aave is “a decentralized non-custodial money market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralized (perpetually) or undercollateralized (one-block liquidity) fashion.” (Source: Aave)

When users deposit funds to the protocol, it mints a new aToken (like aDAI), which can be redeemed for the underlying in much the same way other DeFi protocols operate. The AAVE token is the governance token for the protocol itself.

About Yearn Finance (YFI)

yearn.finance is “an aggregator of various lending protocols that optimizes for the highest yield. The native token YFI is used for governance over the network and is distributed exclusively through active participation and liquidity provision.” (Source: Messari)

There are only 30,000 YFI tokens in existence, and they have all been distributed. Additional tokens can only be minted if a governance proposal (here known as a Yearn Improvement Proposal, or YIP) passes. Visit the yearn.finance FAQs for more.

Investing in layer-1 protocols like Ethereum (ETH) and Bitcoin (BTC) is another more general way to gain exposure to the growth of DeFi.

As DeFi grows in the form of expanded crypto borrowing and lending, use of crypto trading (decentralized exchanges, or DEXs), and other growth of DeFi use cases, then demand for the “substrate” tokens (eg ETH) that underpin DeFi will also likely grow.

Wrap-up

Robinhood’s trading shutdown was a wakeup call for many and reinforced our view that now is the time to move on from antiquated centralized market infrastructure.

Defi offers a rare and open opportunity to invest directly in the next generation of financial infrastructure as it is being built.

DeFi is still maturing and presents a number of risks, including volatile token prices and hacks that can lead to a loss of funds. It is important to do your own research and think carefully about these potential risks before participating in DeFi.

Dr Garrick Hileman is a visiting fellow at the London School of Economics and the head of research at Blockchain.com, the leading provider of cryptocurrency solutions and creator of the world’s most popular crypto Wallet and the Blockchain.com Exchange. You can read more of his analysis and research on Twitter @GarrickHileman and @Blockchain.

Important note

Digital currency is not legal tender and is not backed by any government. Legislative and regulatory changes or actions at your local or at the international level may adversely affect the use, transfer, exchange, and value of digital currencies.


The future doesn’t look like Robinhood was originally published in @blockchain on Medium, where people are continuing the conversation by highlighting and responding to this story.

How useful was this post?

Click on a star to rate it!

As you found this post useful...

Follow us on social media!

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of CoinChapter and CoinChapter does not assume any responsibility or liability for the same.

(This story has not been edited by CoinChapter staff and is auto-generated from a syndicated feed.)
0 Comments
Inline Feedbacks
View all comments
CoinChapter

Founded in 2015, Coinchapter.com has become one of the leading resources for the crypto asset community. Created by a small group of cryptocurrency enthusiasts, Coinchapter.com was built to provide new members of the crypto asset community with unbiased listings of cryptocurrency exchanges and retail options that would allow them to buy the crypto assets that they wanted, how they wanted and at the price they wanted.

Related Crypto News

Grayscale Bitcoin Trust, Ethereum Premium Trading At Lowest Level Ever
After a rough start to the week, the cryptocurrency market has started to gain back some of its losses....
Mike Novogratz: Bitcoin Price Will Reach $100,000 In 2021
Mike Novogratz, founder, and chief executive officer at Galaxy Digital Holdings Ltd., believes Bitcoin price will double by the end...
Coinbase Files To Go Public Via Direct Listing
Cryptocurrency exchange Coinbase revealed documents to go public via direct listing on Thursday. It had already been tipped for a valuation of...
Bitcoin Price Rises after Coinbase’s Breakthrough Filing to Go Public
Earlier in the week, Bitcoin was wobbling between $47,000 and $52,000 after crashing from its record high above $58,000....
Bitcoin Wobbles Around $50,000 but Downside Risks Persist; What’s Ahead?
Bitcoin was fluctuating above and below $50,000 during the Thursday session as traders received mixed signals from the macroeconomic...
Craig Wright Suing Bitcoin Developers Over $5 Billion In Stolen BTC
Craig Wright is targeting Bitcoin developers in his latest lawsuit within the industry. Wright is suing the developers requesting...

Featured Crypto News

Grayscale Bitcoin Trust, Ethereum Premium Trading At Lowest Level Ever
After a rough start to the week, the cryptocurrency market has started to gain back some of its losses....
Mike Novogratz: Bitcoin Price Will Reach $100,000 In 2021
Mike Novogratz, founder, and chief executive officer at Galaxy Digital Holdings Ltd., believes Bitcoin price will double by the end...
Coinbase Files To Go Public Via Direct Listing
Cryptocurrency exchange Coinbase revealed documents to go public via direct listing on Thursday. It had already been tipped for a valuation of...
Bitcoin Price Rises after Coinbase’s Breakthrough Filing to Go Public
Earlier in the week, Bitcoin was wobbling between $47,000 and $52,000 after crashing from its record high above $58,000....
Bitcoin Wobbles Around $50,000 but Downside Risks Persist; What’s Ahead?
Bitcoin was fluctuating above and below $50,000 during the Thursday session as traders received mixed signals from the macroeconomic...
Craig Wright Suing Bitcoin Developers Over $5 Billion In Stolen BTC
Craig Wright is targeting Bitcoin developers in his latest lawsuit within the industry. Wright is suing the developers requesting...