DECENTRALIZED FINANCE: ConsenSys launches a blockchain operating system for global commerce and finance called codefi

Decentralized finance is the latest iteration of the crypto theme, and its core premise is that the manufacturing of financial products across the whole stack will be done by individual creators and entrepreneurs, or aggregated to scale via crowd cooperation driven by a Decentralized Autonomous Organization (DAO) governance like Aragon. For the more traditional readers of this newsletter, these words sound like sci-fi nonsense, but they are not. Payments is the simplest use-case, and already has a decentralized product that works to this day: Bitcoin. Lending, Trading, and Derivatives -- intermediated by software networks and not by legal issuers -- are starting to come online.

Don't take my word for it, take the latest major announcement from Ethereum-focused incubator ConsenSys, who last week announced a new product suite for commercial applications of decentralized finance called Codefi. The organization's co-head of global Fintech Lex Sokolin described the product as "structured like an API-first enabler, like Twilio or Stripe, with options for private label UI/UX or bespoke build if needed. It incorporates digital assets, blockchain payments, public networks and DeFi, and dynamic analytics as the initial modules. The goal of the project is to help institutions build on top of blockchains and emerging DeFi networks and take these solutions not to thousands but to billions of people that can benefit from them today." Codefi's initial product suite is centered around four key areas: payments, networks, data, and digital assets that represent equities, real estate and bonds.

In the bigger DeFi picture, we hope that initiatives like Codefi will help accelerate the progress towards embedding digital assets and the networks in which they move with a deepened functionality necessary to create smart programmable financial instruments. Lex alludes to a future where "bonds will have software covenants that are triggered automatically by data events, equities will issue their own dividends and split automatically in an investment accounts, and commodities will have digital twins and equilibriate in price". Exciting stuff there Lex.

Bringing us back to the present, we would be remiss if we failed to acknowledge that the economics behind DeFi applications are shaky at best, the required networks are still too slow, and nobody’s sure how to effectively apply the theory into practice. But it should not be discounted that DeFi applications could still serve as the foundation of a fully fledged alternative, digital economy in the near future.