DeFi Demystified: Why Your Advisor is About to Get Very Excited About Crypto

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What to know:

Welcome to Crypto for Advisors, where financial wizardry meets the world of digital assets. This week, we’re diving into the wonderland of DeFi, all while sipping tea and pretending we understand what’s going on. Don’t miss a beat-subscribe here to get it delivered straight to your inbox every Thursday.

In today’s thrilling edition, Jennifer Rosenthal from the DeFi Institute takes us on a mind-bending tour of decentralized finance, with a side order of investor surveys. Then, in our Ask an Expert section, Sam Boboev from Fintech Wrap Up drops some knowledge bombs on DeFi trends and the uncanny rise of AI in the mix. Hold on to your portfolios!

– Sarah Morton

Demystifying DeFi

As we mark yet another milestone in Bitcoin’s long and illustrious journey, let’s take a moment to reflect on how far the cryptocurrency industry has come-sort of like looking at your childhood photos and realizing you’ve aged like fine wine… or maybe just a cheap bottle of gin.

A new national study, commissioned by the ever-enlightening DeFi Education Foundation and conducted by Ipsos with a sprinkle of street interviews in the Bronx and Queens, shows that a thrilling 1 in 5 Americans (18 percent, if you must) have dipped their toes into the world of crypto at some point. Not surprisingly, the tech-savvy Millennials (30-44 years old) are leading the charge. And we can’t leave out the bold 1 in 5 Americans who identify as Black, Non-Hispanic-crypto knows no boundaries, right?

However, only 3 percent of Americans have even heard of “decentralized finance” or DeFi, which, frankly, makes you wonder where everyone’s been hiding under their rocks.

So, what exactly is DeFi?

Ah, DeFi-the financial utopia where you control your money, and no one else gets a slice of the pie. Think of it as a software system of financial apps where you, yes you, make all the decisions about your digital assets, free from the clutches of evil middlemen like credit card companies. The magic happens thanks to “permissionless blockchains,” which sounds like the sort of thing a wizard might use if they decided to dabble in fintech. A blockchain is basically a giant public ledger where transactions are verified by thousands of computers (because, you know, one isn’t enough). Bitcoin? That’s the trailblazer of DeFi assets. Then you’ve got Uniswap, a DeFi exchange for trading crypto, and Aave, which lets you lend and borrow digital assets like you’re playing Monopoly-except it’s real money. Think of DeFi as a special sector in the wild, wild west of crypto.

Let’s be honest: most people don’t understand how the internet works, but they’re happy to click on links and buy things from Amazon. The same will apply to DeFi; you don’t need to understand how it functions, but you’ll probably want to play with the toys it makes available.

Interestingly, even though most Americans have never heard of DeFi, many are keen on the idea of being able to digitally send money without third-party interference. According to our survey, more than half of all Americans think this would be a great idea. I mean, who wouldn’t want to pay their bills without dealing with your bank’s ‘processing fees’?

Survey results also reveal that traditional financial systems are increasingly frustrating for the masses. Apparently, fewer than half of Americans believe the current financial system meets their needs. Shocking, right? As technology continues to evolve, it’s no surprise that consumers and investors are seeking alternatives. And, with proposed legislation, a whopping 42 percent say they’d try DeFi for purchasing, paying bills, and-oh yes-saving money. We love a good revolution, don’t we?

So, financial professionals-listen up! There’s a golden opportunity here to lead the way and teach your clients about DeFi, which is still in its infancy. There’s an explosion of new digital asset ETPs (exchange-traded products, if you’re trying to sound smart) that offer regulated exposure to DeFi assets. If you can provide your clients with some clarity and credible research, you’ll be the one they turn to when they want to ride the DeFi wave to the moon. We’ve all heard the phrase, early bird gets the worm… but in this case, the bird gets DeFi clients and the worm is a very happy portfolio.

And let’s not forget, Americans are becoming ever more curious about the future of finance and technology. As financial professionals, you’re in the perfect position to help them prepare portfolios that are ready to meet the world of tomorrow. It’s all about knowing where to direct the curious, crypto-hungry crowd.

The “Demystifying DeFi” research provides the data to make your next client conversation sound as sharp as a newly-minted coin. Don’t miss out. Read the full report here.

– Jennifer Rosenthal, chief communications officer, DeFi Education Fund

Ask an Expert

Q. What key trend will shape the next phase of DeFi growth?

The next phase? Oh, it’s all about tokenizing real-world assets (RWAs). Yes, that’s right-U.S. Treasury tokenization grew by a staggering 700 percent last year. Institutions are finally entering the DeFi space, not to make a quick buck, but to embrace the yield and efficiency it offers. Apparently, stablecoins have exceeded $9 trillion in annual volume, and tokenized assets are quickly becoming the new collateral backbone. Regulated DeFi is the next frontier-where permissioned pools and KYC-enabled protocols mix institutional trust with DeFi’s transparency. Sounds like a crypto love story for the ages, doesn’t it?

Q. How is AI influencing DeFi innovation?

AI is stepping in like the super-smart sidekick that it is, helping DeFi systems become even more self-sufficient. Experts predict that by 2030, $30 trillion in purchases will be made or influenced by AI agents. These smart agents are already balancing liquidity pools, managing collateral ratios, and even forecasting market shifts in real time. Who needs a human when you’ve got an AI running your financial empire? AI and DeFi are now creating self-optimizing ecosystems where AI agents execute trades, manage treasuries, and might even invent the next big financial product-probably while you’re sleeping.

– Sam Boboev, founder, Fintech Wrap Up

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2025-11-06 19:19