Permissioned DeFi: The Key to Massive Financial Adoption?

The buzz around digital assets has paved the way for financial innovations, with decentralized finance (DeFi) being arguably the most notable. Despite its promise, this financial intermediation tool remains largely inaccessible to the general public. However, a hybrid model is emerging: permissioned DeFi. Dowgo explains the implications of this convergence between traditional and decentralized finance.

What is Permissioned DeFi?

Firstly, what does the term "DeFi" stand for? An acronym for "Decentralized Finance," DeFi refers to financial systems built on public blockchains. These eliminate the usual trusted intermediaries, such as banks or brokers, allowing users to access financial services like lending and borrowing without intermediaries.

Decentralized finance stands in contrast to a traditional system that operates on trust and permission. In traditional finance, participants must be approved by a central authority to access services. This ranges from identity verification to checks on personal and financial situations.

Somewhere between these two worlds lies what is called permissioned DeFi. In this new model, blockchain technology is used as a foundation to offer financial services, but access is limited to verified or approved users. This could include accredited investors, financial institutions, or users who have successfully passed KYC (Know Your Customer) and AML (Anti-Money Laundering) checks.

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The Advantages of Permissioned DeFi

The main strength of permissioned DeFi lies in its ability to offer the best of both worlds: the efficiency, autonomy, and transparency of decentralized finance, as well as the security and compliance of traditional systems.

This innovative model positions blockchain as an alternative to financial intermediation, facilitating operations by making them more efficient and, most importantly, less costly.

Permissioned DeFi opens new paths for financial institutions, allowing them to explore the benefits of blockchain while staying within a regulated framework. At the same time, it attracts a new category of investors - both institutional and retail - who were previously hesitant to fully engage in DeFi due to security and regulatory concerns.

How Does Dowgo Utilize Permissioned DeFi?

With an ambition to democratize and facilitate the financing of renewable energy, Dowgo intends to use blockchain as a foundation for intermediation.

To connect operators of wind and solar parks with investors, it's crucial to have a secure and regulated environment. That's why Dowgo turns to permissioned DeFi, aiming to attract billions of dollars from investors towards the energy transition.

In simple terms, Dowgo will work with a company in charge of KYC procedures. This step is essential to ensure that each actor (lender and borrower) is authorized to participate.

This third party will vouch for the client (credentials, nationality, source of funds, etc.) and will be the preferred contact for the operator who has borrowed a large sum of money through the protocol, especially if they wish to access more detailed information about the lenders.

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Conclusion

Although permissioned and decentralized finance is still in its early stages, it undeniably addresses all the excesses of current finance.

Dowgo intends to apply this standard of permissioned KYC within the protocol, ensuring security and trust for the various actors: park managers, institutional investors, and retail investors through crypto exchanges.

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