Democratization of Finance
Centrifuge must make it easy for people to understand the financial jargon it uses - terms like “facility,” “SME” and “origination.” And it should avoid using specialized language unless it’s necessary.
This aligns with the overarching goal of DeFi to democratize finance. Centrifuge shares this goal and is helping achieve it by allowing everyday people access to financial products that previously were the exclusive domain of banks and other financial institutions.
But the middlemen of traditional finance are not the only barrier to access. Financial jargon is another. Not understood by regular people, it places the finance world outside their reach. For DeFi to succeed, financial language must be simplified. Jargon, used only when needed, must be explained.
Specific to Centrifuge, people not steeped in finance represent a huge potential market for lower-risk investment vehicles like senior tranche DROP tokens. To attract them, Centrifuge must make its financial features easy to understand. This will help solve one of its biggest challenges: “Finding senior investors has become very difficult” and will likely remain so, notes Mike Ruzic in a May 10 forum post, observing that “this tranche is by far the lion’s share of pool TVLs” (total value locked).
Establishing Global Reach
Other reasons to avoid jargon or explain it when it’s needed:
· Centrifuge wants to expand its foothold internationally. People on both sides of the investment divide – borrowers and lenders – may be from foreign countries and have limited English-language facility.
· Do not overestimate how much your audience knows - even if they’re from the world of finance. That world is multifaceted; a person from the “fix and flip” real-estate sector may be unfamiliar with terms from supply-chain financing.
Moreover, is it not the intention of everyone producing content for Centrifuge that readers and listeners comprehend what they read and hear?
For sure, jargon can be helpful and at times necessary – e.g., one cannot understand supply-chain financing without grasping the key concept “facility.” Likewise, no one would suggest “small and medium-sized enterprises” be spelled out every time instead of using the convenient acronym “SMEs.” Same with RWAs (which is virtually always explained upon initial use).
After a recent Pool Party where presenters were asked to explain several items of jargon, a participant wondered whether we “should have firms defining basic financial terms like SME, origination, facility, etc. Or should we expect the community to ‘uplevel’ and look up these terms independently if they’re unfamiliar with them?
“The broader context is that we want to build Centrifuge into an institutional financial brand that works with and garners the respect of longstanding traditional institutions, to achieve our mission of accelerating the transition of credit from CeFi to DeFi.”
Who’s Your Audience?
Use of unexplained jargon by Centrifuge might impress financial institutions with its professionalism. But often others are tuning in. For example, the target audience of a Pool Party is the Centrifuge community - from the smallest token holder to the largest. Even in the future, with the largest capital institutions in the world participating in Centrifuge, will they be the only ones attending? Pool Parties or similar events are a moment for Issuers to introduce themselves and to spark community interest - to which end, education, “plain speak,” and building a shared common knowledge are critical.
Financial institutions play a critical role in the long-term success of Centrifuge and its desire to achieve institutional branding is amply justified. But this can be achieved without building walls of words and sacrificing inclusivity.
Centrifuge should lead by example and ensure the financial language of everything that it airs and publishes is accessible. This is what will earn it respect - and help secure its place at the forefront of DeFi.
This piece addresses financial jargon. It leaves to another day debate on crypto jargon. That debate will be informed by the discussion this piece prompts and any conclusions drawn.