DeFi can solve many of our financial problems - both personal (reducing costs) and national (rooting out corruption)
DeFi is based on blockchain technology.
The structure of modern finance is centralized. The currency we use is issued and controlled to some extent by the central bank. In addition, the central bank has an indirect effect on the cost of our loans and savings. In fact, we have delegated control over our financial relations to the authorities.
This system has several disadvantages. In particular, the human factor in decision-making. Sometimes they are, to put it mildly, unsuccessful. For example, against the backdrop of falling oil prices, the Venezuelan government printed huge amounts of money and took a number of other measures that led to the fact that annual inflation rose to more than 1,000,000%.
However, the biggest problem in a centralized system is corruption. On the one hand, central banks have complete control over the printing of money and its value, on the other hand, few details about their operations come to the attention of the public. How can we be sure they are not acting in the best interests of influencers?
DeFi members will interact without the mediation of governments, banks and courts.
DeFi, or decentralized finance , proposes to create a different system. In essence, DeFi is a collection of financial applications based on blockchain technology. Enthusiasts of decentralized finance are united by the idea of building such relationships, where participants will interact with each other without the mediation of authorities, banks and courts. Apps are powered by smart contracts, which are the digital equivalent of legal contracts.
Smart contracts allow you to make payments, take out a loan, trade cryptocurrency (on decentralized exchanges) without intermediaries. Similar to how Uber brought drivers and passengers together without creating a taxi company or email, DeFi can bring financial services users together. In addition, the blockchain technology itself can reduce the risk of corruption and human error.
Operations without intermediaries are more economical.
Manish Kataria, co-founder of Quadency, says DeFi will not only protect private investors from third-party interference, but also help make money. In traditional systems with intermediaries, the participant's "margin" is only 1-2% of the transaction. Direct operations will allow you to earn about 8%.
Max Pertsovsky, Head of Development at Waves Tech notes: DeFi opens up investment opportunities for everyone, regardless of financial condition. Decentralized Exchanges (DEX) allow users to trade digital assets without involving a trusted intermediary to hold your funds. Agreements are concluded directly between user wallets using the same smart contracts.
You can start with just a few dollars by installing the necessary programs on your computer or smartphone. At the same time, Pertsovsky says that investors never lose direct control over their assets and can return them at any time.
DeFi technology is still in its infancy and can be error prone. Smart contracts are much easier and faster to use, but they provide room for new types of risk to emerge. Since computer code is prone to failures and various vulnerabilities, confidential information encoded in it is at risk.
Additionally, as noted by Rocket Fuel BlockChain CEO Peter Jensen, DeFi is not FDIC insured. Therefore, participants also risk losing their capital.
One way or another, the rise in popularity of cryptocurrencies and decentralized banking will influence the future of financial services. So instead of ignoring DeFi, maybe it's better to work on improving them?
DeFi is based on blockchain technology.
The structure of modern finance is centralized. The currency we use is issued and controlled to some extent by the central bank. In addition, the central bank has an indirect effect on the cost of our loans and savings. In fact, we have delegated control over our financial relations to the authorities.
This system has several disadvantages. In particular, the human factor in decision-making. Sometimes they are, to put it mildly, unsuccessful. For example, against the backdrop of falling oil prices, the Venezuelan government printed huge amounts of money and took a number of other measures that led to the fact that annual inflation rose to more than 1,000,000%.
However, the biggest problem in a centralized system is corruption. On the one hand, central banks have complete control over the printing of money and its value, on the other hand, few details about their operations come to the attention of the public. How can we be sure they are not acting in the best interests of influencers?
DeFi members will interact without the mediation of governments, banks and courts.
DeFi, or decentralized finance , proposes to create a different system. In essence, DeFi is a collection of financial applications based on blockchain technology. Enthusiasts of decentralized finance are united by the idea of building such relationships, where participants will interact with each other without the mediation of authorities, banks and courts. Apps are powered by smart contracts, which are the digital equivalent of legal contracts.
Smart contracts allow you to make payments, take out a loan, trade cryptocurrency (on decentralized exchanges) without intermediaries. Similar to how Uber brought drivers and passengers together without creating a taxi company or email, DeFi can bring financial services users together. In addition, the blockchain technology itself can reduce the risk of corruption and human error.
How DeFi Can Change the Future of Finance
Stock markets are open on weekdays from 9:30 am to 4:00 pm. The DeFi engine will allow 24/7 trading without broker intervention, as Robinhood did in January. The online broker has stopped trading in the securities of GameStop, BlackBerry and Nokia due to the large influx of a group of investors who decided to buy up shares of "dying" companies in order to raise their prices. Thus, they wanted to "punish" investment funds that had bet on the fall of these shares.Operations without intermediaries are more economical.
Manish Kataria, co-founder of Quadency, says DeFi will not only protect private investors from third-party interference, but also help make money. In traditional systems with intermediaries, the participant's "margin" is only 1-2% of the transaction. Direct operations will allow you to earn about 8%.
Max Pertsovsky, Head of Development at Waves Tech notes: DeFi opens up investment opportunities for everyone, regardless of financial condition. Decentralized Exchanges (DEX) allow users to trade digital assets without involving a trusted intermediary to hold your funds. Agreements are concluded directly between user wallets using the same smart contracts.
You can start with just a few dollars by installing the necessary programs on your computer or smartphone. At the same time, Pertsovsky says that investors never lose direct control over their assets and can return them at any time.
Decentralized Finance - Utopia or Near Reality?
DeFi functionality needs improvement.DeFi technology is still in its infancy and can be error prone. Smart contracts are much easier and faster to use, but they provide room for new types of risk to emerge. Since computer code is prone to failures and various vulnerabilities, confidential information encoded in it is at risk.
Additionally, as noted by Rocket Fuel BlockChain CEO Peter Jensen, DeFi is not FDIC insured. Therefore, participants also risk losing their capital.
One way or another, the rise in popularity of cryptocurrencies and decentralized banking will influence the future of financial services. So instead of ignoring DeFi, maybe it's better to work on improving them?
