Hackernoon logo"The Present Financial System Will be Replaced by DeFi" - Umar Farooq by@Sergeenkov

"The Present Financial System Will be Replaced by DeFi" - Umar Farooq

Andrey Sergeenkov Hacker Noon profile picture

@SergeenkovAndrey Sergeenkov

Cryptocurrency analyst. Founder and editor at btcpeers.com

With DeFi trend steadily gaining momentum across the world, 2020 has been deservedly proclaimed as the year of “DeFi Renaissance”. Indeed, no other technological innovation shook up the world to the same extent as decentralized financial technology did earlier this year. Even in the face of such a major ground-shaking event as Covid-19, not only DeFi stood up to its position, but also magnified in value to an extent hardly envisaged half a year ago. The TVL index accurately reflects it – compared to the start of this year with $80 million, the total value has now augmented to the transcendental value of $11 billion.

That has a few explanations behind. While in former times DeFi was chiefly directed at lovers of new breakthrough inventions and early adopters, it mostly bore a public image of a fetish for amateurs – while being a more serious thing only for those who immediately sensed its long-term potential. However, there were only a handful of those who truly believed DeFi would go all the way through to reach the apogee where it is now. In a major part, the spectacular growth of DeFi can be attributed to the global economic crisis – being responsible for the stock market crash, it now seems submerged in a deep plunge with no recovery opportunities on the horizon. Another influential factor is a growing wealth of previously unbanked population – the crisis brought all their misery on the surface, and perhaps now it’s the right time for them to finally step in and take an active part in the financially-obsessed society.

While even before the crisis many banks and investment funds had a poor track record with all of its devastating consequences, the hordes of financial customers grew increasingly dissatisfied. After a certain point, it became explicit that it cannot continue like that any longer, and the approach has to be fundamentally reversed. That’s where DeFi made its first serious steps into the business – originally conceived as a financial system with no external supervision, it further advanced to become an integrated part of the new-born decentralized economy, in the scope of which tokens can unrestrainedly be bought and exchanged online – without the bank supervision.

Many corresponding services have followed in the later years. Some of them, like yield farming with its mechanisms of passive earnings, are unstoppably growing and drive the whole system forward. That has received acclamation thanks to DAO and Maker in the first place, while other projects have followed. Another trendsetter is Uniswap – the token swap platform that allows direct exchange with users while eliminating the exchange as an intermediate party between the borrower and the lender. Being fast to take grounds, it now fervently expands to all of the decentralized world, embracing the new trend of Decentralized Exchanges (DEX).

ApexDAO stepped in to combine all these trends in the one pot. While using the system, people can utilize both yield and decentralized swap features, thus being completely assured their security stays unbreached. ApexDAO opened the door for decentralized investment through a collective non-fund pool – SPAC (Special Purpose Acquisition Company), where only the verified and approved DeFI projects find their place. ApexDAO’s SPAC allows its users to borrow funds in tokenized money and use them across the system that is unstoppably growing. By providing sustainable returns and facilitating the funds' circulation, this can help the financially-involved population to go through uneasy times caused by the pandemic by building the wall against the negative consequences of the traditional financial system.

Now, to bring more clarity to the matter, I raised a few questions to Umar Farooq, the CEO of the project.

Andrey Sergeenkov: What, in your opinion, are the main flows of the current financial ecosystem? And how can DeFi provide a remedy to them?

Umar Farooq: Since the birth of the financial system, existing financial services have had many problems. In some cases, the amount of money collected in the fund can be lost or misjudged by failing to give investors accurate information. These problems are commonly caused by dogmatic manipulation by central institutions.

In 2017, blockchain technology was in the spotlight, creating DeFi services that could solve problems in the financial system with transparency and fairness. Investors participating in the ecosystem will be able to protect their assets against the central institution's manipulation by using their voting rights. DeFi, a transparent algorithm of numbers that allows everyone to make a fair choice, is sure to be the cure for the current financial system.

Andrey Sergeenkov: How will the current crisis brought by Covid-19 be affecting the next turn on the road of DeFi development? And, what has been particularly interesting to me - should we attribute the growth of DeFi to the current economic stress?

Umar Farooq: Global pandemic has had a negative impact on our society in many areas for months. Covid-19 has caused people to refrain from going out and meeting in groups, and global economic indicators to fall. Self-employed people close their businesses and those who invested in stocks panic sell due to uncertainty. That's where DeFi comes into the spotlight again. The Defi market is still huge, but if the pandemic continues, it will become a bigger market with money that has lost its path in this low-interest era.

Andrey Sergeenkov: Is there any hope for the current financial system to be rescued? Or will it all become a thing of the past, as some crypto advocates say?

Umar Farooq: In the current financial system, central institutions will be rescued if they transparently disclose all information to consumers and provide services through an impartial process. But this change in the central organs is almost impossible. In my opinion, the present financial system will be replaced by DeFi concept.

Andrey Sergeenkov: From your point of view, how many years will it take for DeFi to take the higher grounds than the conventional financial system that we all know?

Umar Farooq: Many economists say that the global economic crisis is likely to occur every 10 years. I believe that several economic crises will reduce consumer confidence in central institutions, leaving the DeFi market higher than the existing financial system.

Andrey Sergeenkov: Could you elaborate on how ApexDAO plans to secure firm positions in a world as rapid and changeable as DeFi?

Umar Farooq: ApexDAO will benefit investors with three special services. These services, which minimize losses, eliminate opportunity costs and increase profits, will be very attractive in the Defi market. Through strategic partnerships, we will also make flexible changes to keep up with rapidly changing trends in our society.

Andrey Sergeenkov: For our all readers, what would be the advantage of using ApexDAO in the midst of the Covid-19 pandemic?

Umar Farooq: In traditional financial systems, consumers use face-to-face services to invest in funds or other financial products. But in the Defi ecosystem, everything is done online. You can save time and protect your health from the Covid-19 pandemic. It also opens up one investment path in the disease affected stiffened financial markets.

Andrey Sergeenkov: There’s been much talk about SPAC systematic approach and its likeness to the asset management system. However, what would be the differences that you can point out?

Umar Farooq: One of ApexDAO's unique services, the SPAC service, is very different from the existing central authority coordination. The SPAC in today's financial system is subject to many procedures and complexities for ordinary investors to participate. But ApexDAO's SPAC is simple and transparent. Also, since it is participation through cryptocurrency, investors can check the process of acquiring another company or project in detail. Another big difference is how long the SPAC completes. Because we only go through the necessary processes, we have the advantage of earning revenue very quickly compared to the existing SPAC.

Andrey Sergeenkov: What does the process of selecting companies for SPAC look like?

Umar Farooq: ApexDAO's SPAC process is also very unique. Investors who participate in SPAC services can vote for promising companies or projects with their voting rights. The investor can submit a reasonable statement for the vote so other investors can support it. Eventually, the process of acquiring another company from SPAC can be seen as a joint venture between ApexDAO's asset management specialists and the community.

Andrey Sergeenkov: I’ve heard of the company’s token – APEX. What will its value be based on and how are you planning to grow it?

Umar Farooq: Apex, a token of ApexDAO, can be used by users to participate in financial products within the ecosystem. If you pay a small amount of Apex as a fee, you can qualify for financial products with voting rights. You can also deposit Apex in the Yield Farming Pool for APY. These uses allow Apex holders to make profits in a variety of ways. We have a system that is sold only on private sales to early investors in Apex and can only be acquired through mining afterwards. The scarcity and value of Apex will increase as other investors will have to pay and acquire in kind on the exchange if they want to have it.

Andrey Sergeenkov: What is the long-term objective of ApexDAO, and what are the means of achieving it? Also, how is it going to be reflected on the token’s value?

Umar Farooq: We want to achieve financial independence through ApexDAO. After acquiring a small company or project, we are going to expand our business to a large market and introduce a profit algorithm that is circulated in the ecosystem. Cryptocurrency lending systems will introduce simpler methods and will create Smart Dapps through continuous development. The bigger the scale, the greater the power of the community, and in this aspect, the goal is to create each and one of our own financial systems without relying on the existing financial system, leading to an increase of Apex value.


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