A new movement is pumping oxygen into the cryptocurrency industry despite asset prices that remain 75% lower than where they were in late 2017. It’s called DeFi, short for decentralized finance—it’s the notion that crypto entrepreneurs can recreate traditional financial instruments in a decentralized architecture, outside of companies’ and governments’ control. And with fresh allegations of misused funds against the centrally controlled cryptocurrency tether, the argument for decentralized applications has become even more relevant.

Bitcoin and Ethereum are the original DeFi applications. Both are controlled by large networks of computers, not central authorities. Many investors use bitcoin like gold, as a store-of-value investment that protects against inflation, while Ethereum has been instrumental—and controversial—in helping startups crowdfund their operations.  

But newer apps are dominating the DeFi conversation. The “stablecoin” Dai is a bitcoin-like digital token that aims to be a global currency untouchable by central banks. Unlike bitcoin, its value is pegged to the U.S. dollar, drastically reducing the volatility that prevents bitcoin from being practical for everyday purchases. Compound is a crypto version of a money market fund, letting users earn interest. Dharma lets you issue and underwrite debt to gain investment returns.

A new movement is pumping oxygen into the cryptocurrency industry despite asset prices that remain 75% lower than where they were in late 2017. It’s called DeFi, short for decentralized finance—it’s the notion that crypto entrepreneurs can recreate traditional financial instruments in a decentralized architecture, outside of companies’ and governments’ control. And with fresh allegations of misused funds against the centrally controlled cryptocurrency tether, the argument for decentralized applications has become even more relevant.

Bitcoin and Ethereum are the original DeFi applications. Both are controlled by large networks of computers, not central authorities. Many investors use bitcoin like gold, as a store-of-value investment that protects against inflation, while Ethereum has been instrumental—and controversial—in helping startups crowdfund their operations.  

But newer apps are dominating the DeFi conversation. The “stablecoin” Dai is a bitcoin-like digital token that aims to be a global currency untouchable by central banks. Unlike bitcoin, its value is pegged to the U.S. dollar, drastically reducing the volatility that prevents bitcoin from being practical for everyday purchases. Compound is a crypto version of a money market fund, letting users earn interest. Dharma lets you issue and underwrite debt to gain investment returns.