Decentralized Finance: Open Banking on Steroids

Abstract

The Ethereum Blockchain is home to an alternative financial infrastructure. It is implemented in a highly transparent , trust-minimizing and interoperable way. In particular, everything is built on smart contracts and protocols are composable (meaning, that they may freely interact with each other). Moreover, there is no need for trusted third parties, such as custodians or central clearing houses - at least in theory. In reality, most Decentralized Finance protocols are subject to severe dependencies and centralized governance processes. The focus seems to have shifted towards interoperability and away from trust-minimization. Consequently, Decentralized Finance is starting to look a lot like open banking, or to be more precise, an actual realization of open banking's long-term vision.