The idea of decentralized finance (DeFi) was born around 2017, a few years after the launch of the Ethereum Blockchain. Since then, the DeFi space has increasingly attracted attention from many key opinion leaders, influencers and investors.
The general idea is to decentralize financial activities and bring financial control to individuals. DeFi has been reshaping the financial world, so many analysts and participants in the financial space consider the network to be the future.
The market value of Ethereum-based DeFi transactions is proof enough that it is giving TradFi a run for its money.
DeFi may soon be a choice for institutions to fulfill their credit needs due to its ability to provide financing at more competitive rates when compared with TradFi.
What is Decentralized Finance?
Decentralized finance (DeFi) is a financial system that operates on a network of computers rather than a single server. Besides, DeFi is a new digital financial infrastructure that eliminates the need for a central bank or government agency to authorize financial transactions.
DeFi is inextricably linked with blockchain, the Decentralized, immutable public ledger on which Bitcoin is based, which allows all computers (or nodes) on a network to keep a copy of the transaction history.
As such, the concept is that no single entity has control over or can alter the transaction ledger.
DeFi: The Future of Finance
We have come full circle. Our first market exchanges were conducted through barter, which was inefficient. The introduction of money significantly improved efficiency. However, with DeFi, anything may be tokenized, including goods, services, art, and music, to name a few examples.
Thus, you can choose how to pay in the future. Perhaps you pay for groceries with a gold-backed token; maybe you use one backed by IBM stock. It is all up to you.
Thus, you can choose how to pay in the future. Perhaps you pay for groceries with a gold-backed token; maybe you use one backed by IBM stock. It is all up to you.
This is barter, but it is a practical barter. Central banks face competition in today's world. They lose their monopoly over money.
"We, humans, have a natural desire to travel through time and a fascination with future predictions," says the co-founder and CTO of Unstoppable Finance, Peter Grosskopf.
The Likelihood of DeFi in the Future
Increase in DeFi tokens-There are currently more than 100 DeFi Tokens in circulation. Popular cryptocurrency exchanges such as Binance, Okex, and Huobi have already listed DeFi tokens on their platforms. Therefore, in the future, we can expect many new DeFi tokens, and many cryptocurrency exchanges will undoubtedly list them.
Crypto lending becoming easier- Crypto lending is DeFi's most popular application. In the future, DeFi will bring a secure ecosystem for super-simple asset-based crypto lending that will be faster and simpler than the current one.
DeFi-based payment gateways- Payment gateways based on DeFi provide lightning-fast transactions in seconds without charging a single penny as a cross-border transaction fee. Many popular e-commerce sites would include payment gateways like this on their websites.
DeFi in banking- Many countries are preparing to launch Central Bank Digital Currencies to participate in the digital revolution, including the banking sector. It will come as no surprise if banks adopt Decentralized Finance.
Decentralized Finance is gearing up now, and if it provides user-friendly and high-security features, it will do wonders in the future.
Bottomline
The financial services industry is witnessing significant disruption due to technological advancements such as blockchain and distributed ledgers.
What is certain is that DeFi is here to stay, and financial services will never be the same again.
Comments