Decentralized Finance (DeFi)

Going back in time to understand DeFi

About and DeFi. We must first take a look at how centralized finance came to be. Although it seems like money is around us, it is not.

Human transactions began with the swap between goods and services or goods. But with the development of human societies, so did our economies. We invented the currency to make it easier to exchange. They were getting goods and services in exchange for something. We agree it is valuable. It led to the emergence of greater yield. And more excellent economic markets.

In the past, central authorities, such as governments. They have issued the currencies that underpin our economies. Central banks and institutions expect to manage money supply in circulation as the size and complexity of our economies grow. These central authorities gained more power as people trusted them.

You trust that your government will not print money by accident. You trust your bank to store your money.

And when it comes to investing. You trust your assets to a financial advisor by handing control of your money to others, hoping to earn profits from your investments and trades. But the sad truth about our current economic system. It is that the more we trust financial institutions. The more they will power against us.

We have little knowledge of how companies handle our investments. The investors receive only a tiny percentage of the resulting returns, about the dangers to our confidence of those central authorities.

Centralization has been a significant issue in the financial industry. There are a few major institutions. And people who maintain control of the world's money. And capture vast fortunes at the expense of people's trust in them. Over time, this situation widens disparity. Around 1.7 billion people were not benefiting from economic systems in 2017.

The more we know about the current financial system. The more the certainty that the current economic system. It is unable to reduce transaction fees. Or speed up transaction fees, or make those transactions more transparent. Many people lack confidence in central institutions of all kinds. It seems that the levels of distrust. They are increasing day by day all over the world.

The mortgage crisis in America has raised many questions. A few years later, the Greek crisis is going on. It made people wonder if it fits. The global financial system needs people.

On November 18, 2019, the Iranian people set the Central Bank of Iran on fire. During a protest against the central authorities. There is a lot of similar confusion around the world.

The point is that there is a lot to mention them all here. We will talk about this in future articles to increase awareness — of the importance of Defi in our time.

How Does DeFi Work?

The first classify it from traditional finance, with specific requisites, such as bank accounts or approval as a qualified investor. It is not essential in the case of DeFi. 

The platform's source code is available for public inspection. As a result, several of these apps may communicate with one another. And generate even more complicated benefits. Linking the whole network to a significant financial market.

The Goal of DeFi 

DeFi aims to create an open financial system for everyone. That reduces the individual's need for trust. And dependence on central authorities. Technologies such as the Internet, cryptography, and Blockchain. It provides the tools to create an autonomous financial system.

DeFi represents an important shift in our daily lives. With over 4 billion people having access to the Internet. And 63.4% use the Internet through their phones. The Internet is becoming accessible to all parts of the world. And to all levels of society.

Big Tech giants like Facebook Pay, Apple Pay, WeChat Pay, and Alipay. They increase access to financial services without having customers. First, to start a relationship with a bank, a technology company. These are facing many barriers. To people getting benefit from financial services. 

DeFi is the next step. Through it, a solution is provided against government control. Such as monetary control. The potential management of companies in the future. With the development of blockchain companies and DeFi systems. They will take market share from banks.

Advantages of DeFi

The emergence of the Defi services market is a giant leap forward. Banks and credit companies have emerged as competitors. They can redirect part of the cash flow to the Blockchain industry. DApps will help you get a loan that bypasses the bank. Bring your assets to the market carry out financial transactions. And with the lowest commission interest rates will surprise the borrowers. Crypto holders do not have to sit for hours on the exchange. Invest digital assets in a credit pool and get passive income.

The History of Defi

Without question, the year 2020 has been one of the busiest. And the most successful for Ethereum dApps. The total value stored in smart contracts on these platforms has surpassed $14 billion.

Thanks to the introduction of investment strategies such as Yield Farming. And the surge in the fame of loan platforms. Ethereum offers the largest number of financial applications. DeFi has emerged as the Blockchain's flagship product.

Despite Ethereum's certain success is far from the first network to investigate the use of smart contracts. And their implications for available finance. After surfacing as future projects in 2017. Networks like EOS and Tron have influenced the industry. Their DeFi community has great out for (DEX), games betting, and stablecoins. All are administered under a commercial model.

Throughout 2020, Sidechain Liquid joined the DeFi brotherhood. It is launching its first (DEX). With its first liquidity pool opening in mid-2020. The payments network is trying to incorporate RGB technology. And It might help the DeFi ecosystem use LN even more.

Thanks to the money on Chain Firm's Assistance. The RSK lawsuit has aided the rise of DeFi for Bitcoin users. Both efforts have established the first stablecoin—exchange on the side chains in recent years. Outside of Ethereum, a DeFi niche would be forming in this fashion.

The Future of DeFi

Growing DeFi suitable for the masses. It seems that the platforms that use RWA are in order of the day. The centrifuge is an offering that has made a name for itself so fast — developing market over the past few months. The project aims to help Small and Medium Enterprises. 

The platform's governance model is futuristic. They are allowing users to achieve much higher returns. Then they would be using traditional methods such as savings accounts.

The crypto market continues to expand fast. The evidenced by the fact that the total market capitalization of this region has increased from $1 trillion to $3 trillion throughout 2021. It appears that the DeFi industry will continue to advance. It is growing and expanding soon.

Every day an increasing number of major financial firms and investors. They realize the huge social. And the economic potential of this new High-tech field. And while the DeFi market as a whole is in its infancy. It is ready to complete the traditional banking sector.