Coinbase CEO Brian Armstrong said that the crypto-winter only exists for coin prices and that it’s summer for innovation.

This seems to be true, in fact, during the apparent calm, a lot of serious teams have been embracing and developing the underlying technology to achieve real results. One of the key developments that resulted from this period is the emergence of Decentralised Finance (DeFi) applications, who will likely drive the next wave of disruption.

DeFi is an umbrella concept describing financial services built on top of public blockchains like Bitcoin and Ethereum. Three core principles have been proposed to define the values of any company that wants to be part of the #DeFi movement:

1. Interoperability and Open Source: Members of DeFi take interoperability into account when building their projects. This helps strengthen the compounding effects of all our projects as a whole. Open sourcing helps us reach this goal by allowing us to collectively understand how all of our products can be woven together on a technical level.

2. Accessibility and Financial Inclusion : Members of DeFi strive to create a financial system that is accessible to anyone with an internet connection. The vision of DeFi is a world where value flows freely, regardless of one’s geographic location.

3. Financial Transparency : Members of DeFi believe that financial services should not be built in opaque silos, but rather that market-level information should be transparent to all participants while still preserving individual privacy.

As mentioned DeFi applications aim to improve on different aspects of the current financial system through the introduction of a decentralised layer in order to disintermediate rent-seeking middlemen. As of today many different use cases for DeFi applications exist. Examples include:

• Payments: the prime example is Bitcoin itself. Thanks to the Lightning Network this aspect of Bitcoin is becoming more and more relevant, even for micro payments.

• Lending: Dharma Lever, Compound, Celsius Network.

• Margin Trading: dYdX, Nuo

• Derivatives: dYdX, MARKET Protocol

• Tokenization: Abacus, Centrifuge, Harbor

• Insurance: CDx

• Prediction markets: Augur

Consistent among all of these services, is that it requires no third party, bank or clearing house, and often is entirely permissionless.

DeFi is advantageous compared to fintech mostly because it provides some extra functionality and fewer operational risks thanks to its decentralized nature of minimizing trust at the software level, which in turn reduces the bureaucracy compared to fintech (banks are still disposing of the apps users funds and data).

There is a number of other reasons giving DeFi application traction as a new tech layer set to re-invent conventional financial instruments. Some of them are:

• DLTs are able to ensure that the individual is the sole custodian of their assets at all times (provided that the individuals directly control their private keys).

• Due to DeFi’s open source nature, it caters to an increasingly large pool of developers, thus enabling virtually unlimited room for experimentation in the financial services sector.

• Building on the previous point, it is likely that through DeFi, the digital economy will move from digitalised versions of legacy assets, to completely new classes of digitally native assets.

• Blockchain assets are inherently accessible and transparent, so for example, issuances, repayments, and loan terms are both human and machine readable.

At the end of the day, DeFi is obviously in a very early stage, but is a promising movement that has the potential to redefine many aspects of the present day financial services and could subsequently drive mass adoption.