Part 1 — Why do DeFi

Rex Hygate
4 min readDec 20, 2024

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Tldr; — Why DeFi ?

I want some of my assets outside the banking system.
I want to be able to bank outside my local currency.

As we start moving into the DeFi ecosystem, we are met with many choices. By understanding why we’re investing in DeFi, we have a basis to make these choices. The why is very important, and we will come back to it many times.

For me, there are four valid reasons to enter the DeFi ecosystem. This guide will focus on assisting people who are using the first two.

  1. I want some of my assets outside the banking system. I want full control of these assets outside of banking and government decisions.
  2. I want to be able to bank outside my local currency. I want to be able to make unlimited transactions in the currency of my choice.
  3. I want to make money fast. With DeFi, I can use financial instruments that are not available to me using my traditional financial system.
  4. I want to explore this interesting new financial system and learn.

Let’s explore each of these reasons one at a time.

Finance without banks

Before DeFi, there was no other option. All finance went through a financial intermediary, mostly banks. It was the only way finance could be done.

As this has been true for most of our lives, it is difficult for many people to realize the choice. Banks have always been there. They always worked. Why would you not use them?

First, consider how much control of bank has over your finance. For me, (before DeFi) my salary was directly deposited into my bank, all my payments were made through my bank, my mortgage was through my bank, my line of credit was through my bank some of my credit cards were with other banks, but I paid them with my bank. Only my investments were outside the banking system, but no, my broker made all his transactions through a bank.

My bank has complete control of my finances. They hold my money. I ask for transactions, but they have final control of all movements. They set the rules (as per government regulations) and I have to live with them. They can change the rules, and all I can do is either change banks or ask nicely to withdraw my money.

Banks can go wrong in various ways. Recently a big Canadian bank had a major technical failure resulting in loss of access for many. The Turkish government (to combat their spiralling currency) limited the banks in the amount of USD depositors could own.

DeFi offers an option for finance without banks and without government regulatory control. This offers an option that can mitigate the risk that a single bank or a single banking system may have. It’s good to develop this option before problems start. Access to DeFi will be limited once the banking system is under stress. If you want to do a portion of your finance outside of banks, in DeFi, this guide will show you the way.

Transact in the Currency of MY choice

Most banks transact in their local currency. Transacting in any other currency is generally limited and expensive.
Once you move your money on chain, the original local currency no longer matters. You have the choice of asset. Unsurprisingly, DeFi is overwhelmingly USD stable coins, BTC or Eth. Other currencies are available, but they are small. When people have choice, they crowd around the biggest asset, which today is USD.
If you are a business or individual that wants to transact internationally in USD, then DeFi offers an excellent option. Transact just means transfers. If you want to transfer internationally in USD stable coins, BTC or Eth then this guide will show you how to with safety.

I want to make money fast

DeFi offers a number of sophisticated financial tools, including leverage. We are not going to cover this. If you chase alpha, you will use the blockchains very differently from our recommendations. Some of the security aspects will be useful, but mostly this is not the guide for you.

I want to explore this new financial system

DeFi is fascinating, and there is much to explore. It unlocks financial innovation and the products are interesting. But exploring involves poking into the new pieces of DeFi. This guide will stick to the very established parts of DeFi. So if you want to explore, this guide will be of limited value.

Summary

So, if you want to transact outside your banking system and your regulatory controls in USD or BTC, then this guide is for you. We will give you the tools to do this independently with safety. The next article is on the entry point to crypto, exchanges.

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