Welcome to Invesco’s new series of articles, looking at the evolving themes in digital assets and investment management. In it, Dave Dowsett, Global Head of Innovation and Emerging Technology at Invesco, with contributions from Ashley Oerth, Senior Investment Strategy Analyst, explore the growth of Decentralised Finance in asset management, how this is possible, and what the potential implications are for the industry.
Decentralised finance or “DeFi”, may be a familiar term in the context of cryptocurrencies. It may even spark thoughts of crypto speculation and arcane workings of code. Yet what truly underlies DeFi is a trend that is reshaping how people think about and structure the financial economy more broadly.
The idea is to take traditionally centralised aspects of traditional money management such as decision-making authority, settlement, and recordkeeping and to introduce a decentralised approach. The goal being to reduce the potential for fraud, abuse, and corruption, and increasing efficiency and access.
DeFi accomplishes this by using a decentralised database technology, commonly referred to as blockchain. This technology makes it possible for users to access different types of financial products and services without the need to go through an intermediary, such as a centralised institution.