Blockchain: Great Potential, Great Obstacles

"Most of us are correct about the quantum leap in financial efficiency that blockchains offer.

Decentralized finance, or DeFi for short, is a suite of financial products that are essentially self-executing blocks of code built atop a global ledger. Instantaneous settlements, 24/7 uptimes and universal interoperability are par for the course of this new infrastructure.

But financial efficiency will do little to satisfy DeFi's harshest critics. Take Sen. Elizabeth Warren, who recently called DeFi "the most dangerous part of the crypto world."  Ms. Warren ought to embrace built-into blockchains transparency and financial inclusion though.

Ms. Warren has made a career out of documenting the moral hazard that persists among America's largest financial institutions. 

But if Wall Street is a black box, the blockchain is an open book. Every bit of financial activity -- every transfer, loan and derivative -- is auditable because it is documented "onchain." Leverage can still build up, but not behind closed doors.

More important, DeFi offers a viable path to broad financial inclusion. What the internet and smartphones did for access to information, DeFi does for financial technology. It empowers underserved people to use and develop financial services that are open, cheap and secure.

The watchword of crypto has become WAGMI: "We're all gonna make it." Despite the fear mongering, DeFi will make this promise a reality.

Benjamin Simon

Partner, Mechanism Capital

San Juan, Puerto Rico" [1]

1. Blockchain: Great Potential, Great Obstacles

Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 24 Dec 2021: A.16.