The importance of blockchain in its ability to work in a decentralized manner, which means the ability to create a specific service, system or application that works through a series of computers distributed in different regions around the world without the need for a single central authority to control this, and among the many applications and services that have become dependent With this idea, Decentralized Finance or DeFi is one of the most prominent and important today.
Decentralized finance, or DeFi, as it is known in short, is a new financial system that works on blockchain technology, and as such it includes digital assets, smart financial contracts, protocols and services that operate exclusively decentralized without any authority or authority controlling them. Decentralized finance aims to provide financial services of all kinds to everyone around the world with greater freedom to deal with their owned assets, away from the restrictions and conditions imposed by traditional financial systems on individuals.
What are the most important potential uses of decentralized finance?
Lending and borrowing platforms
These platforms are the most widespread application of decentralized financing, as they rely mainly on smart contracts to organize lending and borrowing operations thanks to their ability to work and implement without the need for a third party, so that the two parties can define the conditions they want and agree on them within the contract, and with the process being limited to both parties only.
Cash banking services
Banking services are not limited to lending and borrowing only, as it includes other things such as insurance, mortgages and money exchange as well. To achieve this, decentralized financing applications need to use stable digital currencies (Stablecoins) and unfortunately, Tether, which is considered the largest stable currency available today, is not decentralized enough to be reliable, especially after the many problems and accusations it faces, but with the passage of time other currencies may be adopted more stable and reliable To be used more broadly with decentralized finance applications.
Decentralized trading markets
These markets are also considered one of the most important applications of decentralized finance, the biggest example of which are the decentralized trading platforms (Decentralized Exchanges) or DEXes, which allow users to freely trade digital currencies without the need to use central platforms such as Coinbase that restrict users and impose high fees on trades and do not allow the exchange of all Coins.
Why are applications of decentralized finance still so unpopular today?
In spite of the many advantages offered by decentralized finance applications and services, they are still few in reality, and if we exclude the significant growth that they were able to achieve this year, their spread has been significantly slow in previous years, and it is not known whether their current growth Will continue or not, due to several reasons, including:
Poor performance of blockchain platforms
There are some potential security risks
Users' errors are more likely to cause problems
The applications are not easy to use
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