The concept of Decentralized Finance (DeFi) has been the subject of hot debate since when the concept emerged in the crypto industry.
As per recent surveys, approximately 30% of the entire crypto community knows that there is a thing called ‘DeFi’. 70% of them are those who haven’t paid attention to DeFi nor tried to understand it.
However, only 3% of the crypto community knows the concept, understands it, and explores the benefits offered by DeFi.
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Blockchain’s & Cryptocurrencies’ Foundation Built on “Decentralization”
It may be noted that the whole foundation of blockchain and cryptocurrencies was laid on the core principle of ‘decentralization’. In general ‘decentralization’ means free of intermediaries.
In the case of ‘decentralized finance’, this means a financial system which too is free from intermediaries such as banks, etc.
Unique Benefit of DeFi
DeFi allows its users to avail of financial services irrespective of who they are and in which particular place they are while using the services.
Resultantly, DeFi users are ultimate custodians and authoritarian over their assets and wield complete control over them without being interfered with by anyone.
Importance of DeFi
DeFi is particularly used to availing of financial services on specific blockchains which include amongst others Bitcoin and Ethereum blockchains.
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DeFi projects on these blockchains allow their users to trade digital assets, lend/borrow crypto loans, obtain insurance, earn interest, etc. All such activities are free from interference by any third party.
Currently, DeFi users have been availing of all services which were originally provided to them by financial institutions. In contrast to banks, DeFi projects require very minimal documentation and the process is super-fast.
It creates transparent financial services and remains accessible to everyone subject to the availability of an internet connection.
In the past few years, DeFi has witnessed massive growth, and hence financial advisors are forced to make them fully understand the DeFi concept. They simply cannot afford to ignore this rapidly expanding market.
One of the benefits DeFi has to offer is its ‘non-restrictive’ nature. It can be accessed by any person with an internet connection irrespective of whoever or wherever he is.
Usually, the data pertaining to blockchain-based smart contracts are accessible to anyone and anybody who sees the transactions and identities.
Similarly, in DeFi, the identities, as well as transactions, are also public hence authenticity of transactions and identities is automatic.
One of the things for which DeFi is appreciated by the majority is its ‘transparency’. If a system is transparent as that of DeFi then it creates trust naturally.
The trust strengthens further because of cryptographic features in the blockchain which ensure documentation of authentic and legal information only.
DeFi also hosts a variety of DeFi saving apps which come in great handy for users in compounding their yields/interests emanating from contracts.