Future of Financial Services is Decentralized Using DeFi Blockchain
2021 has been a dramatic and powerful year for the cryptocurrency space as a whole: Bitcoin’s crashes and surges, seem to be paving the way forward for further growth of the crypto space. However, there’s one part of the cryptosphere that’s charged ahead of all else- DeFi.
Decentralized Finance (DeFi) has been making waves over the last several months following the surge in platforms and products offering DeFi services. DeFi is a movement predicated around creating global, permissionless financial applications.
DeFi is a fourth-generation blockchain platform that enables the development of fast, intelligent, and transparent decentralized financial applications. This game-changing platform provides users seamless access to decentralized financial services through an easy-to-navigate interface. In this way, DeFi can provide what the competition cannot — a reliable alternative form of financial services built on top of Bitcoin’s blockchain.
Some of the Fintech verticals being disrupted by DeFi.
· Decentralized lending platform
· Decentralized Exchanges
· Borderless Transactions
· Asset Management
· Insurance
· Decentralized Prediction Markets
· Token Issuance Platforms
· Banking the Unbanked and Underbanked
· Decentralized Exchanges
DeFi has the potential to completely reinvent the world’s financial systems, merging the scale and familiarity of the traditional economy with the security, efficiency and transparency of the public blockchain. The security, efficiency and transparency inherent in the public blockchain will allow for innovation and growth like we haven’t seen in modern times
DeFi is essentially just a conventional financial tools built on a blockchain — specifically Ethereum, which offers an open and permissionless system that is easily available to everyone. This interoperability helps companies scale products by easily leveraging other innovations in the industry. They are mostly based on open-source protocols or modular frameworks for creating and issuing digital assets and are designed to confer notable advantages of operating on a public blockchain like censorship-resistance and improved access to financial services.
DeFi solves this problem by processing transactions on the blockchain. Not only does this cost a fraction of standard remittance fees, but it also sends money faster than standard financial networks. With DeFi, an employee in Europe can send funds to his family in Asia for less than a dollar and have the money received in less than 30 seconds. It can assist in generating credit and creating a loan for yourself: DeFi technology can enable the user to “own the whole experience in that they are their own bank, using their own assets as collateral”.
Additionally, DeFi can be used to transfer credit — users can engage with the traditional payment rails (Visa, etc) or use the public blockchain to exchange funds around the world in an instant. DeFi platforms can also be used to store credit. Instead of trusting money to managers of banks or funds, users control where their money sits and how they use it.
In a functioning (DeFi) decentralized financial system, internet connection would be the only prerequisite to accessing financial services, rather than geography or circumstance. A reduction in the centralization of those that control and own the infrastructure underpinning financial markets would increase transparency, decrease costs and reduce the opportunity for censorship and / or manipulation.
The global “unbanked” (both individuals and enterprises) would gain access to financial services. DeFi would not only facilitate markets for illiquid financial products that already exist but would also allow for the creation of new financial products and markets that don’t yet exist. The ability to more effectively arbitrage, borrow, hedge, and access liquidity would spur more institutions to join the movement without restricting the usage of these products and markets exclusively to them.
DeFi has the potential to completely reinvent the world’s financial systems, merging the scale and familiarity of the traditional economy with the security, efficiency and transparency of the public blockchain. The security, efficiency and transparency inherent in the public blockchain will allow for innovation and growth like we haven’t seen in modern times
DeFi’s growth has continued to expand along with the number of potential use cases for decentralized finance platforms.
Lending protocols, security tokens, derivatives, exchanges and more, Ethereum’s DeFi landscape is playing out as one of its most profound application environments so far — despite the network’s scaling woes.
Defi Advantages
· Accessible to everyone with internet
· Offers all the benefits of Peer to Peer Networks
· Highly cost effective for its Users
· Completely cutout the middlemen
· No government Control
· Fully Automated System
· Speed, Efficiency and Security of Heavy Encryption
· Transparent
DeFi Tools have some Advantages:
· Cannot be manipulated, i.e. once a smart contract is uploaded on the Ethereum network it cannot be altered, arrested, tampered with or counterfeited. It will simply work forever just the way it was designed to work. This makes it immutable, which means that if someone wants to modify it, or perhaps update it to a new version, it is necessary to create another smart contract and move all the assets to the new one.
· Completely Predictable, i.e. their behaviour always follows the instructions contained in their computer code. Obviously, the downside is that there is no room for flexibility: the behaviour of these tools is cold and merciless, absolutely unmanageable since it does not allow for actions that differ even minimally from those foreseen by the code.
· Publicly Verifiable By Anyone. Thanks to any public blockchain explorer, and the fact that they are open source, anyone can access the code and check in detail how everything works.
DeFi delivers where other platforms failed. As the industry matures, more resources will be allocated to build DeFi solutions. Currently, there are a handful of exciting developments and projects, either recently launched or launching soon, that have the DeFi community excited, and for good reason — community involvement is at the core of DeFi and one of the leading advantages over the traditional financial services markets.
DeFi has the potential to completely reinvent the world’s financial systems, merging the scale and familiarity of the traditional economy with the security, efficiency and transparency of the public blockchain. The security, efficiency and transparency inherent in the public blockchain will allow for innovation and growth like we haven’t seen in modern times.
