Decentralized finance, more commonly known as DeFi, will revolutionize the way we build our financial system. It is a component of Ethereum, the world’s second largest cryptocurrency. If you don’t understand it yet, get started.
The most basic DeFi is another use of blockchain, the underlying technology of cryptocurrencies such as Bitcoin. It has the potential to remove banks from the equation and create a more transparent and traceable system that allows a wider range of people to access finance. From crowdsourcing student loans to expanding investment options, DeFi offers more financial options.
But that’s not what you want to enter blindly. According to a Cardify survey, only 15% of crypto investors say they fully understand the value and potential of crypto. If you want to understand some of the new trends in modern finance while avoiding danger, you need to understand DeFi.
How to get started
Start by doing your own research on blockchain, the underlying technology of DeFi.
The important thing is to find a reliable and objective source of information. That means investigating the motives of the source and avoiding sites that describe something all good or all bad. Quality sources explain the strengths and weaknesses. For example, if you aren’t told that most digital wallets aren’t insured by the FDIC, you may be in the wrong place.
One way to get started is to watch this video by mathematician Grant Sanderson explaining how Bitcoin really works. You can then explore the information resources provided by Coinbase and GitHub to dig deeper.
Then you can see the resources provided by Decentralized Autonomous Organization (DAO). DAO is an ownerless digital group that resides on the blockchain and pursues a collective purpose. Contributors to these organizations are often at the forefront of the topic of expertise and can be a great source of information.
Do everything you can to dig a little deeper into the DeFi weeds. Information about DAO is updated regularly. This is important for rapidly advancing areas. If you want to try learning DAO, check out Crypto, Culture & Society.
However, the information from DAO is crowdsourced and the quality is different for crowdsourced ones. If someone tells you something is the best since sliced bread, proceed with caution.
More advanced learning is available
There are obvious restrictions on scrutinizing the Internet yourself. Webins and podcasts from trusted sources are good options for more structured learning. They tend to get to market faster, ensuring that the information is relatively up-to-date.
Think of the quest for knowledge as similar to fishing. In webins and podcasts, instead of finding the best lake on your own, you’ll have the opportunity to spend an hour with a guide who will tell you where to fish and which lures to use. Useful podcasts include the Stephan Livera podcast, Real Vision Crypto Channel, The Defiant, Pomp Podcast, and Unchained. As with DAO, get the advice provided by the podcast with a grain of salt. Hosts often invest deeply in the world of DeFi.
Massive open online courses (MOOCs) are another option. They are providers of educational content and target different levels of understanding. They are often taught by trusted professionals. You can also audit for free, unless you need a certificate upon completion. I found the MOOC “Decentralized Finance (DeFi) Infrastructure” run by Cam Harvey of the Duke Fuqua School of Business to be particularly valuable.
The downside is that it can take up to 6 months for MOOCs to bring their content to market. That is, the MOOC may not be completely up to date.
Finally, for those who are considering changing jobs to FinTech or who need to improve their skills for work, boot camps and higher education programs should be considered. Provides personalized and intensive learning. This is useful if you are considering switching between disciplines.
Many well-established companies have the resources available to employees to pursue external education to improve their skills. Before suggesting an idea for an expensive learning option to your boss, first do a thorough research to make sure you find the right one.
Be ahead of the times
Like cryptocurrencies, DeFi is beginning to play an increasingly important role in the economy. In the not too distant future, DeFi can be expected to be used for many things, from real estate transactions to small business loans and savings diversification.
Even if you’re not ready to jump, you still need basic DeFi literacy. Children who have begun to save may see the bright light of Bitcoin and Robin Hood, but the pitfalls are not so many. They will need your help and guidance.
There are also professional advantages. As these new financial modes expand, you don’t want to wait for someone to tell you that your knowledge and skills are out of date. The learning and development departments of most companies tend to be a few steps behind the cutting edge. As you master the functional knowledge of DeFi, your boss knows that you are an employee who reads well, takes the initiative, and is drawn to the top of the pack.
CFA Institute Professional Learning Managing Director
CFA® Barbara Petitt, Ph.D., Managing Director of Professional Learning at the CFA Institute, provides high-quality, practitioner-related education to help members and industry professionals develop their knowledge, skills and abilities. You are responsible for providing the content. She holds a CFA charter and a PhD. She holds a Master of Finance in Finance from the University of Grenoble Alpes and a Master of Business Administration from EDHEC Business School.
