Decentralized Finance, commonly referred to as "DeFi" among the blockchain community is proving to be more that just a buzzword. It is a trending topic in the crypto space and blockchain community as a whole. Although the blockchain network that powers DeFi is still in it initial stages, it offers a compelling value proposition where institutions and individuals can make use of broader access to financial application without needing a trusted intermediary.
What exactly is DeFi
DeFi, the short form of "Decentralized financial service" is a truly decentralized service system that can be used to add more value to your money. DeFi represents a a global ecosystem of decentralized apps that are built on Ethereum blockchain because it is a programmable blockchain . The dApps are replication most of the services that are offered by traditional banks i.e lending , borrowing, earning interest on savings and many more. And by running the dApps also known as protocols, the technology offer a peer - to- peer financial network.
As opposed to the decentralization of money through Bitcoin, Ethereum etc, the aim of DeFi is to generally decentralize the traditional financial industry. It operates on the concept of opening traditional financial service to everyone regardless of their status or proximity by providing a permission-less financial service ecosystem based on blockchain infrastructure.
What DeFi promises
DeFi has come up with an alternative monetary policy that is revolutionizing the banking system. Imagine being able to borrow fund, complete financial transaction and be part of the complex financial world without the need of a financial institution or a middleman. This is the freedom DeFi was built to offer.
DeFi promises a full fledged capital market.
It promises to decentralize the financial sector, allow censorship resistance and global participation regardless of social status and eliminates trusted third parties.
Promises a relatively fats and low cost financial transactions due to the integration of the blockchain technology.
The user is in full control of their money. This is achieved through non-custodial in the DeFi applications where user are allowed to remain in possession of their private keys.
The best beneficial part of DeFi is that it operates in a way that any person in any place can access its functionality as long as they have access to the internee through computer or smartphone. A person can easily store and transfer their funds and access other financial services, all is needed is a digital wallet which can be freely downloaded.
For the last two years, DeFi has grown from a small scale project to a huge number of platforms on blockchain where investors, browsers and lenders and any individuals can make transactions without the need to visit the bank or financial institution. Isn't that exciting!!
Currently there are billion dollars tied up in the DeFi network, but there are potentials of trillion of dollar in tradition finance moving to it uses which presents a massive growth potential that is attracting newbies. DeFi is the current exciting project in crypto space however there are too many hurdles and changes everyday which makes it hard to understand DeFi. Most of the times we hear or read things that we don't understand, but we can only realize their potential if we try it.
