DeFi Technologies: Bridging the Gap Between Capital Markets and Decentralized Finance
There is little doubt that the ascendance of DeFi – short for decentralized finance – is revolutionizing the financial world in unprecedented ways.
DeFi, an umbrella term that refers to person-to-person financial transactions that take place on public decentralized blockchains like the Ethereum Network instead of centralized banks, allows anyone with an internet connection the ability to lend, borrow, or trade without third party financial intermediaries. Other benefits of DeFi include the elimination of transaction fees levied by banks and financial institutions, verifiable and tamper-proof transactions, and the ability to transfer funds from person to person in just seconds or minutes.
While DeFi is still in its early stages, billions of dollars are flowing in from traditional banking, presenting some remarkable business opportunities. Russell Starr, CEO of emerging DeFi powerhouse DeFi Technologies (OTC: DEFTF, NEO: DEFI, GR: RMJR), is looking to cash in on one of those opportunities. Starr believes that DeFi’s impact will be seismic, likely completely transforming the way that the world does banking. He explains, “DeFi is the next extension of the Internet to our everyday life. Imagine every single transaction that you do at a bank. Any time you buy a house, any time you buy a car. DeFi is destabilizing, decentralizing all of that. The size of the market for DeFi is literally the entire global economy. It's not billions. It's not hundreds of billions. It's hundreds of trillions.”
Starr, an entrepreneur with a background in economics, founded Echelon Wealth Management before joining DeFi Technologies in 2021 as executive chairman and eventually CEO. A DeFi convert, he recognized the incredible potential for the new technology to disrupt the traditional banking infrastructure. He explains, “For anyone who is unsure of what this is about, I take them back to the early days of the Internet. In 1995, email barely existed and there were one or two browsers. Now you look at what the Internet's done to everyday life.”
While DeFi Technologies has only been around for a year, the digital asset firm is already making big waves in this nascent industry. The company’s value proposition is to speed up the adoption of DeFi by making it more accessible to everyday investors, essentially bridging the gap between traditional capital markets and decentralized finance.
DeFi Technologies is divided into three distinct business lines, each giving investors access to industry-leading decentralized technologies without the need of opening a dedicated crypto account or having a digital wallet. The core element of the business is their Asset Management arm, a suite of financial products including eight ETFs (or ETPs as they’re known in Europe) – Bitcoin Zero, Ethereum Zero, Solana, Cardano, Polkadot, Avalanche, Terra, and Uniswap – that are currently traded on Sweden’s Nordic Growth Market, and which will soon be listed in Euronext, the world’s fourth-largest exchange. In Sweden alone, the company went from zero to nearly $400 million in Assets Under Management (AUM) in a single year.
The ETFs/ETPs are the best place to start for crypto newbies, says Starr, “These are listed prospectus-cleared equities that your mom and dad, sister or brother, anyone who's terrified of opening a Coinbase, a Kraken or a Frax account, can be comfortable with. It can be really complicated to open one of those accounts. So, we're taking that whole concept and putting it onto listed regulated exchanges.”
The company also operates a Venture Capital arm that gives clients opportunities to access lesser-known seed investments by purchasing shares of the company, rather than investing in specific DeFi protocols. The Venture Capital arm gives investors access to a broad variety of early-stage DeFi projects that may later evolve into moneymaking juggernauts.
To help identify these early-stage DeFi projects, the company counts two of the of the most well-known people in the crypto sphere as advisors - Anthony “Pomp” Pompliano and Teeka Tiwari.
The third plank of DeFi Technologies is the DeFi Infrastructure arm which sees the company running independent nodes that validate transactions on the blockchain. According to Starr, the infrastructure arm of the company not only provides oversight of the decentralized networks, but it also has the potential to be a huge revenue generator. “By virtue of this ecosystem being decentralized, when you get to a certain number of tokens that you control, you can actually run a node, and you can generally create between one and two million dollars per node. For example, if we have 10 listed ETP's, we may have 10 nodes that we're running, which would generate $10 to $20 million in revenue for our company.”
Another potential revenue generator for DeFi Technologies is their recent CHF 25 million (around C$34 million) investment with Swiss crypto bank SEBA Bank, the first of its kind between a private crypto bank and a public technology company. The deal will see DeFi Technologies work with SEBA Bank to pioneer new products and solutions that will provide greater access for regulated investment opportunities in the DeFi space.
DeFi Technologies is bolstered by a highly pedigreed management team with deep roots in crypto, including COO Johan Wattenstrom, one of the co-founders of Coinshares; and Chief Strategy Officer Diana Biggs, the former head of innovation at HSBC.
Being the first publicly traded company in this area of the DeFi space, DeFi Technologies doesn’t currently have any direct competitors. Companies like WonderFi Technologies (NEO:WNDR, OTC:WONDF), and Prophecy DeFi (CSE: PDFI) operate in the DeFi space, but none are bridging the gap to traditional capital markets the way DeFi Technologies is, which Starr feels gives his company a leg up. “DeFi Technologies gives what no other company gives in the industry right now. In my opinion, 99% of money flowing into DeFi is going to come through people accessing it on traditional listed exchanges. You can see that by virtue of Fidelity trying to launch a Bitcoin ETF, Ark trying to launch a Bitcoin ETF, they're trying to create ways for people to access this industry in a traditional fashion. But guess what? We're already doing it."
If Starr’s predictions about the direction of DeFi play out, it will be good news indeed for DeFi Technologies.
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FULL DISCLOSURE: DeFi Technologies is a client of BTV-Business Television. This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. Any action taken as a result of reading information here is the reader’s sole responsibility.