The DeFi and CeFi ecosystems can be truly symbiotic. Where one fails the other shines. DeFi brings security, scalability and often increased yields for investors they can’t get inside the traditional financial ecosystem. Centralized finance brings liquidity. Many CeFi investors are opening their eyes to the advantages of the blockchain and smart contracts and how they can enhance their own portfolio performance using this technology. As the CEO of RSK, a secure smart contract platform, Diego Gutiérrez Zaldívar views the future of finance as a decentralized one, with Bitcoin as the greatest DeFi opportunity of all.

Diego defines himself as a Bitcoin evangelist. As one of the founders of the Argentinean Bitcoin Community, he organized the first bitcoin conference in Latin America. He was also one of the early practitioners of web development in Argentina and Latin America back in 1995 and since 2012, has been fostering and promoting Bitcoin technology across Latin America.

Diego Gutiérrez Zaldívar

CeFi Vs DeFi

The great debate is whether decentralized or centralized exchanges are better. Centralized Exchanges act as gateways between national economies and the global crypto economies, which means of course that they are subject to the regulations of the countries they operate in. Their role is critical in facilitating the transfer of wealth from the legacy financial system into the new financial rail that decentralized Blockchain networks are building.

According to Zaldívar, on the other hand “Decentralized Exchanges (DEXes) allow users to swap assets within a certain crypto economy in a non custodial way where users are in full control of their own assets. DEXes provide a transparent price discovery process and benefit from a global pool of liquidity and some have achieved volumes on par with the top centralized Exchanges like Binance.” Both systems, then, are critical building blocks for the emergence of the new Internet of Value that started with Bitcoin and for the last decade has been expanding to create the foundations for the financial system of the future.

The Benefits of Smart Contracts

The broad definition of a Smart Contract is any computer program that executes the clauses of an agreement between multiple parties. This concept was coined in the early nineties but the true value of the concept emerged when it was combined with cryptocurrencies and in the context of self executing decentralized Blockchain networks that had the ability to enforce complex agreements to handle digital money and other digital assets. The first implementation with relevant adoption of the concept was the Ethereum Network. A couple of years later RSK followed, extending the Bitcoin Ecosystem to support smart contracts; other decentralized networks joined soon after.

According to Zaldívar “Smart contracts are not very different from traditional contracts, except that they are coded and digitally recorded on the blockchain. And this last quality gives smart contracts a host of significant advantages over traditional contracts — smart contracts provide users a trustless, autonomous, and self-sufficient way to settle agreements without intermediaries and enable decentralized Blockchain networks to offer all the financial services offered in the legacy financial system in an open, global and interpretable environment.”

The Difference Between Smart Contracts and Blockchains?

A blockchain is an immutable ledger in which decentralized networks record the last agreed status of the network. In simple terms is an immutable registry where the last state of the network is recorded. A smart contract is business logic executed by decentralized networks based on which balances and state of agreements are updated and recorded on the blockchain. Smart Contact enables the settlement of complex transactions that go beyond exchanging digital assets. In other words, it's exactly what it sounds like: a contract, or an agreement between parties involved in a transaction that holds each party responsible (buyer vs. seller, for example) for their role.

RSK: The Smart Contract Platform

There are smart contracts on different blockchain platforms such as Ethereum, RSK, EOS and others. RSK was the first smart contract platform to be built as part of the Bitcoin Ecosystem and secured by Bitcoin miners. The programming language shared by Ethereum and RSK and most widely adopted in general for smart contacts is Solidity.

Zaldívar believes that Decentralized Finance (DeFi) is undoubtedly a great opportunity “but the full potential of DeFi’s interoperability, global reach and openness will be unleashed once DeFi is connected and adapted to the needs of the traditional economy.”

The Future of DeFi

He is doubtless that “DeFi has the potential of becoming the financial system of the future, one that will enable individuals to protect their wealth, be able to trade without intermediaries, in an instant, transparent and secure manner with much lower costs than possible use. This new financial system will increase efficiency of the productive and financial sectors but furthermore it will be inclusive by design potentially bringing financial services to every human being with Internet access.”

However, according to Zaldívar, first some key steps must be taken:

“DeFi is in a stabilization process that needs to reach the stability and usability levels provided by neobanks in order to reach mass adoption. Also National Financial systems need to be seamlessly integrated to Global crypto economies. Finally new risk assessment models need to be created in decentralized Blockchain networks around reputation based profiles similar to those used by sharing economies (Uber, Airbnb, etc) and eCommerce platforms (eBay, Amazon, Alibaba, etc). Once all those pieces are in place”

Are Blockchain Developers Trying to Rebuild the Internet? Zaldívar says it's not about rebuilding it, rather more about filling the gaps and going back to the true peer-to-peer nature that drove the exponential growth of the Internet. He explains “The Internet as we know it, while has democratized access to information and communications has not been able to create the same level of disruption in the financial world. At the same time it has become more and more concentrated in the hands of a few corporations and how consumer data is exploited without respect of users' privacy is becoming highly concerning. Bitcoin and blockchain emerge as a solution to fill the gaps in order to build a truly decentralized and inclusive Internet of Value and Information where users are in control of their wealth, data, and their privacy.”

Web 3.0’s Place In This Future

Web 3.0 is an internet where information and value flow in an integrated manner and where no permission is needed from a central authority to participate. The rise of technologies such as distributed ledgers and storage on blockchain will allow for data decentralization and create a transparent and secure environment, overtaking Web 2.0’s centralization, surveillance and exploitative advertising. Decentralized infrastructure and application platforms will displace centralized tech giants, and individuals will be able to rightfully own their data. Privacy is one of the key challenges users face now and within the next decade, and blockchain technologies can help solve that problem and provide them with full control of their data and identity.

RSK plans to continue placing the building blocks that to their mind will “enable a new global financial system, so that developers and entrepreneurs can build the solutions that are needed for it to flourish.”