So what’s the story behind Decentralized Finance? How has all of this started? What happened in DeFi in 2020? And where are we going in the future? You’ll find answers to these questions in this article.
Let’s start from the beginning.
Although there is no one agreed-upon date when decentralized finance was born, there were a few important events that made DeFi possible.
The first of them was the creation of Bitcoin in 2009 by Satoshi Nakamoto.
Despite whether Bitcoin should be classified as DeFi or not, its inception was the key enabler for the whole cryptocurrency industry which decentralized finance is part of.
Bitcoin also allows for sending payments around the world in a decentralized fashion and payments is one of the areas of finance – looks like DeFi to me.
But most importantly, Bitcoin enabled the creation of Ethereum – a default blockchain for all top DeFi protocols.
Although sending Bitcoin around the world is cool – finance doesn’t stop there. Every robust financial system needs a set of other important services such as lending, borrowing, trading, funding or derivatives.
Bitcoin, with its simple and limited language called Script, was just not suitable for these kinds of applications. Script’s limitations were one of the most important factors that contributed to the creation of Ethereum by Vitalik Buterin.
Ethereum launched in 2015 and quickly started attracting more and more developers who wanted to build all kinds of decentralized applications – ranging from games, such as CryptoKitties, to financial applications.
Ethereum, with its Turing-complete programming language Solidity and the ERC20 standard for creating new tokens, quickly became a go-to smart contract platform to build on.
This leads us to one of the oldest DeFi projects on Ethereum – Maker.
Maker is a protocol that allows for creating a decentralized stable coin – DAI. The project was formed in 2014 by Rune Christensen who was inspired by another project BitShares – a blockchain created by Dan Larimer.
Development of Maker was funded by Venture Capital and was eventually launched at the end of 2017. The first iteration of the protocol – Single Collateral DAI – supported only ETH as collateral. This was later expanded to Multi Collateral DAI that was launched at the end of 2019.
Maker remains one of the most important projects in DeFi and is clearly one of the early pioneers of the whole decentralized finance space.
Another project worth mentioning that was really popular in 2017 was EtherDelta.