What is DeFi and why it’s so hyped now?
DeFi is one of the hottest topics in the crypto field.
First of all, let’s try to understand the economic situation that led to some growth of the DeFi concept pretext.
The traditional financial market is concentrated. National governments issue a daily currency that powers our economy and is used for all trades such as government and banks. They therefore have the power to control and regulate the flow and availability of such currencies on the market. We also shift ownership of our assets to different financial institutions , such as banks, in anticipation of higher returns. The problem with this is that because all control and the fund is centralized, the danger is at the core as well.
And, when it comes to investing, you place your trust in financial advisors to guide you on strategies, mutual funds, and the market share in exchange for a reduction in your return. The return seems to be more, but it is dangerous as the advisors may also make bad decisions or fail to see market danger. So you’re just getting a part of the funds from the investment.
In the context of the equity market, how many of us are actually owning business shares?
Although compared to 2017, middle-class people now have a bit more stocks, but it’s still very differ from what the richest hold.
Also, it’s worth mentioning here that we have very little or no say on where our money is being spent and how it’s being treated by these companies — meaning there’s a lack of accountability.
All problems arise because of the centralization of finance that underpins the global economy, but it is certainly not an open framework.
The alternative is to decentralize this.
Aren’t Cryptocurrencies Suposed to Handle Decentralization?
Although cryptocurrencies are decentralized, they can mostly be accessed via centralized access points, such as exchanges.
Most of these crypto ventures are operated by centralized entities that lack accountability or transparency.
Defi is short on decentralized finance. Decentralized finance encompasses digital assets, protocols, smart contracts, and blockchain-based software.
Given the versatility and level of growth, the Ethereum is the primary option for the DeFi application, but that doesn’t mean it’s the only blockchain platform.
Think of DeFi as an open financial ecosystem where you can create a variety of small financial resources and services in a decentralized manner. Since these applications are designed on a specific blockchain, they can be mixed, changed and integrated to suit your needs.
What’s the DeFi Offering?
DeFi is giving you autonomy of your own money.
While several new-age banks and fintech firms pledge to give users more power, in fact you must trust them to handle your funds. DeFi’s mission is to give you full control over your properties, and this could be due to decentralization and blockchain technology. In addition, many financial app developers are implementing open-source trading protocols across decentralized exchanges.
The fact that both protocols are open-source enables us to create new financial products on top of them. Developers around the globe should work together to create new products that lead to faster innovation and a stable network.
Anyone can safely store, exchange and invest their assets in blockchain and gain a far higher return than the conventional financial system. Since there are no intermediaries managing your assets, you have full control over your investments.