Today, users around the world can quickly access financial applications such as loans, insurance, crowdfunding, and payment networks with ease, Thanks to experts, a new interconnected system of financial services called Decentralized Finance is being provided to tackle the inefficiencies in the current financial sector.
Surprisingly the tremendous growth of DeFi and its ecosystem is bringing the traditional banking approach to sound sleep, lets look at the benefits of Decentralized Finance and how wealth is created with the technology.
What is DeFi
DeFi otherwise called Decentralized Finance is an ecosystem of financial applications built with public blockchain technology. In simple terms, DeFi brings financial services to any individual with access to the internet.
Rather than trusting Traditional authorities, Like your local bank where they are only available until closing time, or when they brainlessly close during holiday season Leaving all their customers in a painful financial Tragedy.
I would store my asset in a permissionless manner, Where there is no Third-party involved to block or freeze your account. This will mean that the money you own in the DeFi ecosystem is available for use anytime needs be.
Now that we have seen a brief overview of what DeFi is, we can better understand the benefits and how wealth is created with its technology
What are the advantages of DeFi
Now that we have seen a brief overview of what DeFi is, we can better understand the benefits and how wealth is created with its Technology.
- Open-Source: The term open source refers to something people can modify and share because its design is publicly accessible.
By design, Decentralized Applications are accessible to you and everyone around the world, making it a better space for riskless banking, lending, borrowing, borderless transactions, and all financial transactions.
- Permissionless: There is absolutely no decision-making Authority in the DeFi ecosystem no permission is required this is especially beneficial for people in countries where the banking system is underdeveloped, inaccessible, or tightly controlled, DeFi means access to banking-like services available instantly from a smartphone.
- Asset management: Before anything else, an owner needs to take a count of all the assets that he owns. If he is not aware of the exact number of assets in his inventory, then he won’t manage them effectively. Easily track all your DeFi assets from a single dashboard, The process makes it easy for individuals and businesses to keep track of their assets with no middleman involved.
- Financial Data: DeFi instantly brought about a more frictionless financial system. by democratizing financial data discovery rendering a new overview of how financial data is sourced. Financial analysis is used by internal and external stakeholders to evaluate business performance and value. This will help alleviate the problems currently seen with financial data providers worldwide.
- Tokenization: Is used as a means to secure sensitive data when it’s being transmitted on the internet, Tokens are non-sensitive digital currency that is mostly used by traditional finance securities for lightening fast settlements, 24*7 trading, and access to international transfers.
- Decentralized Exchanges: A growing number of tools for decentralized trades have emerged, they allow peer to peer trading of tokens and cryptocurrency. These platforms enable global trading participation, Transactions in these Decentralized Exchanges are handled via smart contracts and a third party involvement is not possible.
Many believe DeFi is the future of finance and that investing in disruptive technology early could lead to massive gains.
But it’s difficult for newcomers to separate the good projects from the bad. And, there have been plenty of bad. Check out the current risk associated with using Decentralized Applications HERE
As DeFi has increased in usage and popularity through 2020, many DeFi applications, such as meme coin YAM, have crashed and burned, sending the market capitalization from $60 million to $0 in 35 minutes. Other DeFi projects, including Hotdogs and Pizza, faced the same fate, and many investors lost a lot of money.