Decentralised Finance


Decentralised Finance (DeFi) platforms allow people to lend or borrow funds from others, speculate on price movements on a range of assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. DeFi uses a layered architecture and highly composable building blocks the execution of financial transactions through applications.

DeFi involves the use of decentralised applications or DApps to perform financial functions on distributed ledgers using smart contracts to avoid centralised financial intermediaries (including exchanges), or Blockchain. The technology was made popular by Bitcoin, but is now widely adopted. The most common platform is Ethereum, and is characterised by the use of smart contract programs, or DeFi protocols. These protocols are typically run using open source software that is built an

maintained by a community of developers. DApps are usually accessed through a Web3 enabled browser extension or application such as Metamask, allowing users to directly interoperate with the Ethereum Blockchain digital wallet. DApps have a unique code that may only work on specific platforms and their backend code operates on a decentralised Peer to Peer (P2P) network and can facilitate varied and sometimes complex financial transactions and also virtual reality in areas such a social media and online gaming:

  • Cryptocurrencies including Stable Coins
  • Non Fungible Tokens (NFT’s)
  • Metaverse

We are seeing an ever increasing move to a virtual reality space with the internet creating an interactive user experience through a computer generated environment, which combines aspects of social media, online gaming and augmented reality or Metaverse. Clearly the Metaverse encompasses a lot more than the world of DeFi, which plays only a small, but increasing part. However, there are parallels and a lot of excitement being generated at the potential of this yet to be realised “Nirvana”.


Sustainability does not immediately spring to mind when we think of crypto mining, or the creation of cryptocurrencies, as it is costly and notoriously energy intensive and therefore, cannot be considered anywhere near sustainable, unless there is access to an abundance of cheap renewable and sustainable energy resources.

This question of sustainability with the very exciting opportunities that there are in decentralised finance is something that we have yet to fully reconcile. However, it is a challenge that is intriguing in an environment that would like to distance itself from the worst aspects of the traditional financial world while encompassing aspects of ESG; such as a move towards decarbonisation.

For example, the Ethereum Merge was executed on September 15, 2022. The Merge was the Ethereum blockchain’s transition from a mining-based proof-of-work (PoW) blockchain to a more energy efficient, scalable proof-of-stake (PoS) system. The Merge is expected to lay the technical foundation for future scalability improvements on the Ethereum blockchain and includes an expected reduction of energy consumption of up to an expected 99.95% .