Why DeFi Will Reshape the Future of Finance

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Sean O'Connor

Dec 9, 2021 • 9 min read
Why DeFi Will Reshape the Future of Finance

Decentralized finance or DeFi is a relatively new idea even in the fintech world, but it has been gaining traction over the past year.

DeFi offers a different experience to traditional banking and opens up a world of possibilities previously closed to consumers.

In this episode of Disruption Talks, we spoke with the Co-Founder and CTO of Unstoppable Finance, Peter Grosskopf. Peter is a big name in the fintech and blockchain space and joins the live stream to talk about making DeFi accessible, the role of regulators, and the future of DeFi.

What is DeFi?

Decentralized finance is an umbrella term for Ethereum and blockchain applications. As DeFi uses blockchain, it allows several entities to hold a copy of transactions. This means that nothing is controlled by a single source. It’s all decentralized instead.

This is important because traditional centralized systems can limit the speed, flexibility, and transparency of transactions, giving users less direct control over their money.

For example, when you make a purchase in a coffee shop, there’s a financial institution that sits in between you and the business. That middleman has almost total control over the transaction and can pause it or record it in its own private ledger. In DeFi, that middleman is cut out.

The possibilities of decentralized finance and its current state

Decentralized finance opens up many possibilities. One thing that stands out is that it removes the need for financial bureaucracy.

The flexible nature of DeFi means it’s essentially permissionless and can more easily accommodate third-party integrations.

Another benefit to DeFi is that because it uses blockchain, everything is more transparent. This could help to improve due diligence and reduce financial scams and negative business practices. With every part of the blockchain easier to identify, it’s a big deterrent for fraudulent behavior.

Industry experts and media outlets have begun to report that DeFi may “kill banks” or at least reshape the financial industry as we know it.

Almost $90 billion has already been deposited into Ethereum-based DeFi protocols. Some outlets are also reporting that DeFi’s growth on the Ethereum blockchain is up 780% in 2021. That’s according to a study by JP Morgan. The quantity of Ethereum coins locked into DeFi has ranged between 35 million to 40 million since last year.

Starting with blockchain and DeFi

Blockchain and decentralized finance have been Peter Grosskopf's passions for a while now, but what led him to start Unstoppable Finance?

Originally, he was interested in technology and started in information systems and coding on the side. This led to a few different projects and businesses.

His first step into the finance world came when he was working as a CTO at a company builder which decided to move into the fintech space. This led to the creation of Solarisbank, which Peter joined as a CTO, bringing him firmly into the banking space.

In 2017, the first blockchain hype began. Peter knew this technological development had the potential to revolutionize the traditional finance system.

"I began questioning how much further we could push the same infrastructure to other fintech companies," he says.

"I also predicted that many functions of banks would eventually move on blockchain infrastructures."

His interest in decentralization started further back in 2007 when he wrote his Master’s thesis on social network portability. He realized that social networks were collecting and controlling a lot of his personal data. His idea was to create a decentralized identity on the web that different online services could use (with his permission). The idea was to have more control of his own data.

From there, Peter had a few other roles and projects that eventually led him to found Unstoppable Finance.

Managing a rapidly scaling company

Like with Unstoppable Finance and his other projects, growing a scaling company is a challenge. Luckily for Peter, it’s a challenge he loves.

He says the most important things you need to do when scaling a company include learning how to make good decisions, work fast, get the resources and tools you need, and overcome obstacles quickly.

“It's really about getting those first people in and delegating some of these obstacles to them, because then you can focus on others.”

Regulators vs. DeFi and new technologies

When it comes to new technologies, especially in the finance world, regulators can feel a bit like the elephant in the room. Not all regulators are up to speed with the latest technologies, especially when they aren’t used by some of the bigger players in the market.

“Regulators are always running behind a little bit, but this is a good thing,"

Peter says. "It’s better for them to see what’s happening and then design rules around new technologies rather than design the rules before the developments mature.”

Peter’s approach is to speak with regulators and the government and explain everything in as neutral a way as possible. He calls it “pro-bono technical consulting,” essentially explaining how blockchain works, how DeFi works, and talking about the potential challenges.

“The relationship between the people who are driving specific developments, and doing sort of pro bono technical advice is super important. Then the regulators really can wrap their head around and also find good solutions.”

How Unstoppable Finance is making DeFi accessible

In the early days of blockchain, bitcoin’s invention and the first centralized exchanges became popular with younger people looking to invest in something other than stocks. While this has arguably become more of a mainstream thing, Peter sees that the next wave is going to focus more on decentralization.

The core idea of Unstoppable Finance is to make the use of non-custodial wallets much easier to manage. Traditionally, crypto, blockchain, and DeFi have been unfamiliar to the general public, and getting access to this space has been tough. It’s hard to learn it all by yourself, so most people avoid it or distrust it.

“There's so much crypto lingo around. What's the hash? What's a private key? And what responsibility do I actually take when doing my own custody? Then also, lots of the projects are very cryptic, very technical, very geeky, and also very digital," explains Peter.

"We want to open this whole space by building a cutting-edge mobile application,"

he adds.

In other words, Unstoppable Finance’s aim is to make the space more accessible to all and to grow an ecosystem of decentralized projects around it.

The future of Unstoppable Finance and DeFi

Peter says that the best thing about blockchain decentralization and crypto is that there are so many different use cases that you can work on simultaneously. He’s not just looking at financial use cases, he’s also looking at things like producing solar energy on your roof and tokenizing it and selling it on to decentralized energy markets. There’s a wealth of possibilities that go far beyond finance.

“There's a lot of use case scenarios that are beyond finance. I'm keen that adoption can go quicker, because in the end, they will all be connected in a digital wallet, no matter if it's finance-related or not.”

According to Peter, an advantage of digital payment methods like stablecoins and cryptocurrencies is they maintain some privacy. Of course, he recognizes that discussions around money laundering and other crimes come up in this case, but he also sees opportunity there.

“The opportunities lie in connecting the digital ecosystem. For example, connecting digital identity with a noncustodial wallet, the transactional layer of blockchains and finance provided by smart contracts, tokens and cryptocurrencies. If you bring this all together, you can really connect everything at the highest common denominator and not on the lowest one because then everything is digital.”

This discussion is part of our Disruption Talks recordings, where we invite experts to share their insights on winning innovation strategies, the next generation of disruptors, and scaling digital products. To get unlimited access to this interview and more insights from industry experts, sign up here.

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