# The emergence of an alternative, decentralized financial system

Outside of this traditional financial system, the last decade has seen the emergence and growth of an alternative and entirely digital ecosystem. Some term this ‘[decentralized finance](../../glossary)’, or DeFi for short, and involves is a set of open-source software applications that provide financial services powered by blockchain. The open-source nature of these applications means that innovation can occur at a rapid rate as developers improve upon one another’s code.

Cryptocurrencies and tokens have become synonymous with this DeFi ecosystem. The most well-known cryptocurrencies are Bitcoin and Ether (used on the Ethereum network). Bitcoin was released as open source in 2009, and as of April 2023, there were over 10,000 cryptocurrencies and tokens worldwide with a market cap of [around US$1.3 billion](https://www.coingecko.com/).

The DeFi ecosystem has become a diverse array of protocols and applications that paved the way for tokenized assets.  There are potential benefits from using this infrastructure. These exchanges never close, don’t require going into a physical location to transact, and are thereby accessible by anyone with a cell phone and internet connection. However, there are also potential downsides to tokenized assets and decentralized exchanges, as intermediaries can serve as an important check to ensure that applicable functions in transaction processing are adequately performed in a safe and secure manner. In addition, transacting in digital assets can be more complex than most traditional retail investing as digital assets have unique operational risks, such as the need to hold such assets in a blockchain wallet.

However, the foregoing gives a hint as to where the new opportunities lie to provide more choice and options in financial services.  Potential success will need to involve coupling the protections obtained through regulated or responsible financial services, including security and reliability, with the potential benefits that come from new DeFi infrastructure such as convenience, accessibility, transparency and low cost.

