It gets funny knowing that the change the world so much clamoured for is not regarded when it finally comes through. I mean, people have repeatedly gotten tired of a system [Apex bank] dictating how transactions should be done with almost skewed policies that appear unhealthy to grow businesses, but themselves.
Then liberation came with the name blockchain technology, and people are scared if this is the right path to what they had prayed for. Ladies and Gentlemen, meet DeFi, your long-awaited answer to your prayers.
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What is DeFi?
DeFi is the fusion of two words: Decentralized and Finance which is a mechanism for making financial goods available on a decentralized blockchain network that is open to the public. DeFi is a blockchain-based technology type of finance that leverages smart contracts on blockchains to offer traditional financial instruments without relying on central financial intermediaries for regulations and control.
What is Blockchain technology?
Wikipedia best describes Blockchain technology as a development that includes elements that use cryptography-based blockchain technologies. Just like in the gaming world, Blockchain elements in these games are most often based on the use of cryptocurrency or non-fungible tokens which players can buy, sell, or trade with other players.
What about DeFi?
What you should note is this: companies that use blockchain technology, on the other hand, aspire to decentralize at least some components of existing technologies, such as how we handle our data, money, health, and legal systems. DeFi proponents anticipate that this philosophy will spread to finance, allowing them to create virtual marketplaces that are comparable to their traditional equivalents.
What makes DeFi different?
Consider yourself in labour quarters for the time being, with the added responsibility of sending money home. So you go to the banks, right? However, how can you send enough money back when the majority of it is spent on remittance fees? What if your local bank is closed for the weekend or a national holiday?
Is DeFi Crypto?
Though DeFi is frequently mentioned in connection with cryptocurrencies, it goes beyond the creation of a new digital currency or value. DeFi's smart contracts are designed to take the place of traditional financial systems. For many of these financial transactions, one of the most appealing aspects of DeFi is that it removes the barrier to entry. You don't have to have your money managed by the government or a corporation, and you don't have to meet certain criteria to get certain financial products.
Is DeFi a good investment?
Beyond the risk of crypto volatility, there is also a security and fraud risk with DeFi, which stems from the DeFi protocols' reliance on smart contracts, which may have exploitable vulnerabilities. The DeFi market, the technology that powers it, and the necessary regulations that will inevitably follow will only serve to reduce vulnerabilities and risk while increasing the appeal of this digital finance tool.
You might move to a decentralized economy at this time. DeFi networks are constantly available and offer a variety of payment options, including peer-to-peer transactions (p2p). This makes cross-border payments instantaneous and less expensive because there are no additional costs to pay to middlemen. DeFi also enables smart-contract-based loan and staking services, which let consumers earn more returns than they could with traditional financial products.
Is the world ready for DeFi?
Just like the first paragraph points out, contrary to popular belief, individuals will not trust DeFi goods since there is no central authority. However, for a decentralized economy to be more realistic, the notion of open finance must be fully acknowledged. This is why Binance, BitOasis, and other crypto exchanges are stressing the use of DeFi tokens by listing them. DeFi tokens and their products will be difficult to catch once their full potential is put to real-world use, with broad adoption on the horizon.
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