How DeFi Enables Small Investors To Access Private Investments And Exotic Assets

By July 19, 2021DeFi
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The total value locked in DeFi protocols has skyrocketed to $53.7 billion from just $2.5 billion a year ago. Most of this growth has been driven by retail investors and traders.

Most institutions have started dipping their toes in DeFi. The institutional money into the DeFi ecosystem would boost liquidity and provide better rates.

A strong reason retail investors are attracted to crypto and DeFi is that there is no centralized authority with the power to control transactions. But DeFi offers much more than that.

DeFi protocols are offering the same products and services as the traditional financial ecosystem but in a fully digital, decentralized way. They are making their offerings available to everyone, everyone at a faster pace and lower cost. Without any intermediaries, geographical, or jurisdictional barriers.

Democratizing Access To Illiquid And Exotic Assets

One of DeFi’s strongest applications lies in democratizing access to illiquid, exotic, and privately-held assets. Assets that small investors never had access to in traditional finance are now within their reach in DeFi. In traditional finance, most of the high-value and exotic assets are not accessible or economical for the masses.

It is demolishing the walls erected by TradFi that made it nearly impossible for small investors to access such assets.

For example, Convergence Finance is enabling asset owners to tokenize their illiquid and private assets to enjoy the liquidity and instantaneous trades offered by DeFi. Small investors can buy and trade tokens representing real-world assets.

To help real-world asset owners bring their assets into DeFi, the ConvO token wrapping layer of Convergence Finance creates Wrapped Security Tokens (WSTs) representing the asset. The asset owners have the choice to sell fractional pieces to traders and investors from around the world. The Wrapped Security Tokens are deposited in a liquidity pool on ConvX for trading.

The tokens give you price exposure without the hassles of holding the actual asset. It is similar to how derivative products such as options, futures, and swaps in traditional finance represent an underlying asset.

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