DeFi or decentralized finance has been slowly taking over the financial system, and it is expected to take over the traditional financial system in a few years.
What is DeFi
It’s the financial system that is not influenced by any centralized systems or authorities like the government or banks, allowing users to directly connect to another user without a middleman.
DeFi has made it easy for the people to use any kind of financial instruments from anywhere to anyone. It is the biggest ecosystem built on Ethereum which is decentralized. But there are other ecosystems developing very fast like Binance Smart Chain, Cardano, PolkaDot or Tron.
Being decentralized means that your info is protected, distributed and anonymous from reaching any institutions that could use it to their advantage.
Also with the rising demand for lending and borrowing money, DeFi has played an important role. As it gets harder and harder to get loans or lend money, DeFi is making it easier and easier.
Giving people the power to directly connect with other people who are willing to lend it, borrowing money at automatic interest rates that change upon the supply and demand.
If you’re a lender, then you can put up your crypto assets for lending under a smart contract and you can start lending at your desired amount.
These coins are then sent over to the smart contracts for lending which then generates Interest for the money you lend.
DeFi gives you the possibility of becoming a market maker. You can provide liquidity pools to Decentralized Exchanges (DEX) and earn interest on transaction fees.
In DeFi we have also stable coins which are pegged to national currencies like USD or EUR. Insurance protocols also start to pick up the trend and the possibilities are limitless because you can join these options together. That is why it’s called Money Lego.
As it is not centralized, you won’t have to worry about getting revoked or getting your payment blocked. Forget about verification too. But everything is still in a very early stage, so there is a lot of room for improvements.
DeFi being known for its advantages has bought opportunities and is making the financial markets safer and widely accessible to the general public.
Its never-ending advantages have made it into a hot topic of discussion in the financial world.
As more and more people choose to opt DeFi over the traditional finance system, the more it will grow and the more it will gain awareness.
DeFi is not just a financial instrument, it’s the future of finance.
It’s not just a system, its a solution made for the people by the people.