How will the Gamestop/Robinhood saga eventually lead to the rise of DeFi
The Gamestop(GME) and Robinhood saga has shed light on how controlled the traditional financial system is. It evidently showed us that amateur investors will never be on the same playing field as hedge funds.
For those who are confused, Gamestop Corp. is an American video game, consumer electronics, and gaming merchandise retailer. Gamestop’s GME stocks were heavily shorted by hedge funds, which could have equated to billion dollars of profits. However, a group of individuals from Reddit’s “r/WallStreetBets’ eventually rallied together millions of retail investors to save Gamestop, leading to a meteoric 1,600% increase of GME’s price within two weeks.
In the midst of the bull rally, Robinhood, a commission-free brokerage platform, started to halt the trading of GME and several other stocks as hedge funds collectively lost more than $3 billion dollars. It was also reported that Robinhood’s free services are now pointing towards the fact that user trading data is the real money maker by selling it to hedge funds. Some Redditors argued that Centralised Financial platforms, such as Robinhood, are “robbing from the poor and giving to the rich’’.
As reported by Cointelegraph, Marie Tatibouet, Chief Marketing Officer of cryptocurrency exchange Gate.io, said, “Everyone has the freedom to create financial instruments and create their own markets instead of being reliant on someone else managing it for them.”
Robinhood’s questionable and shocking actions raised the main issue of Centralised Finance (CeFi): Centralised systems and human gatekeepers can limit the actions and transactions of retail investors, us. Users should have full access and full control over their assets and decisions at all times.
Subsequently, Gamestop and Robinhood led to the mass shifting their attention towards Decentralised Finance, a transparent solution that addresses the shortcomings of Centralised Finance.
Decentralised Finance (DeFi) allows the traditional financial to be restructured, operating on a decentralised network, without any middleman or government. With most DeFi apps built on the Ethereum network, DeFi allows users to trade, lend, borrow and exchange. Smart contracts, a computer code, which automatically transacts when conditions are met, is written on the Ethereum network.
Essentially, DeFi is:
- Transparent 一 Anyone can view the codes and each transaction is recorded in the blockchain, where users can view it (etherscan.io)
- Interoperable 一 Enables other DeFi applications to function with one another
- Non-custodial 一 Users owns personal keys, thus having management over their data and assets, with no intermediaries needed for transacting for P2P (peer-to-peer) transactions.
Currently, DeFi has more than $38 billion locked in. DeFi has been the hot topic of Cryptocurrency in 2020 and the hype around it has continued into 2021.
At Spikeswap, we ideate the concept of incorporating Decentralised Exchange (DEX) and Insider trading. We believe a level playing field should be provided for users to trade on our platform, gaining insights into “whale movements”. DEX are highly reliable, with every transaction recorded on the blockchain for auditing and tracking purposes. On Centralised Exchange (CEX), “whales” or projects can easily hide their tokens/assets in exchange wallets, going unnoticed. This is where Spiking comes into play to reveal these movements to the public.
The situation that occurred between Robinhood and Gamestop has brought us to question: Is it time for a generational shift to DeFi? As we speak, innovative DeFi projects, such as Exeedme (https://www.exeedme.com/), where gamers are able to monetise their skills, are slowly integrating into the DeFi ecosystem, boosting the potential for the upside of DeFi.
Is this the start of a brand new Financial Journey? Since last year, Bitcoin has risen 300% to date, with Ethereum rising 570%, while the DeFi market cap has risen from $1 billion to $38 billion till date.
DeFi will be a continually hot topic and the question of when DeFi will take over the traditional financial system is in a matter of months.
