08/02/2022
๐ช๐ต๐ฎ๐ ๐ถ๐ ๐๐ฒ๐๐ถ?
DeFi, is an abbreviation for Decentralized Finance, is another key word that has entered our lexicon, joining Bitcoin, cryptocurrencies, NFT, blockchain and meta-currency.
๐ฆ๐ผ ๐๐ต๐ฎ๐ ๐ถ๐ ๐ถ๐ ๐๐ฒ๐๐ถ?
Today, most financial transactions in the economy are digital. We are still using banknotes and coins on occasions, but it is marginal. It is a logical step that this largely digital finance is evolving in a decentralized manner. DeFi supporters will tell you that this new system will eliminate the need for banks and traditional financial third parties to process all types of transactions.
๐ฆ๐บ๐ฎ๐ฟ๐ ๐๐ผ๐ป๐๐ฟ๐ฎ๐ฐ๐๐
Any contract you make in the real world, whether you are taking out a mortgage or a mortgage or wanting to trade a few stocks or bonds, is based on rules. So this rule base can be coded. And this is exactly what intelligent contracts are, pieces of code that automatically execute actions if certain parameters are met. The revolution of smart contracts is that instead of being on a computer, they are cut by anyone who has a copy of the blockchain in question. In this form they can not be modified and will remain exactly the same code that will work in exactly the same way, forever.
๐ช๐ต๐ ๐ฑ๐ผ ๐๐ฒ ๐ป๐ฒ๐ฒ๐ฑ ๐๐ฒ๐๐ถ?
Why should we replace the traditional financial system with a decentralized version? According to some experts, DeFi has some advantages over its centralized counterpart. The first is efficiency. Removing intermediaries causes less friction and makes the processing of a financial transaction more fluid. The second advantage relates to costs. In traditional finance, transaction intermediaries are charging fees that are generally higher than what you currently pay in DeFi applications. The final point of DeFiโs sale, experts agree, is that it is a more open and democratic system. According to the Global Findex 2017 report, worldwide there are about 1.7 billion adults who are โbanklessโ, which means that they are excluded from the financial system. With DeFi, you do not necessarily have to have a bank account to access the funds, but you do need an internet connection.
๐ช๐ต๐ฎ๐ ๐ฐ๐ฎ๐ป ๐๐ผ๐ ๐ฑ๐ผ ๐๐ถ๐๐ต ๐๐ฒ๐๐ถ?
With DeFi, the idea is to have access to all the functions accessible with a crypto token. You can borrow and insure, make derivatives, crowdfund and gambling, among others. Take a simple example like crowdfunding. Letโs say you want to raise funds for a charity cause. In the current centralized system, you have to trust a third-party platform to raise funds from donors and give them to charity when the funding goal is achieved.
๐ช๐ต๐ฎ๐ ๐ถ๐ ๐๐ฒ๐๐ถ?
While in a decentralized system, you can replace this broker and save on platform fees. You can simply set the parameters of this exchange and encode it into an intelligent blockchain contract. If the criteria in the โsmartโ contract are met, the money is automatically sent to the charity. If not replenished, the funds are automatically returned to all persons who have donated.
๐๐ ๐ถ๐ ๐๐ฎ๐ณ๐ฒ?
DeFi promises to democratize finances safely, conveniently and efficiently, but does that seem too good to be true? This comes with some important risks to consider. The first are defects in intelligent contracts. Since they are immutable, if you have an error in the code, it will be repeated constantly. The second risk concerns hackers, who may find breaches in the code and exploit it to their advantage. The third risk is related to the instability of cryptocurrencies. The ultimate risk has to do with the difficulty for newcomers to understand what DeFi projects to choose and which to invest in.
๐ช๐ถ๐น๐น ๐๐ฒ๐๐ถ ๐บ๐ฎ๐ฟ๐ธ ๐๐ต๐ฒ ๐ฒ๐ป๐ฑ ๐ผ๐ณ ๐ณ๐ถ๐ป๐ฎ๐ป๐ฐ๐ถ๐ฎ๐น ๐ถ๐ป๐๐๐ถ๐๐๐๐ถ๐ผ๐ป๐ ๐ฎ๐ ๐๐ฒ ๐ธ๐ป๐ผ๐ ๐๐ต๐ฒ๐บ?
While DeFi seems to offer everything that traditional finance does and even more, will it be the end of the financial system as we know it? Experts say it is more complicated than that and intermediaries will not disappear automatically, but their role will have to evolve. They will find themselves in need of proving their added value to the public as they will no longer be in a monopoly situation.
https://investingscan.com/crypto/what-is-defi-in-2022/
What is DeFi? DeFi, is an abbreviation for Decentralized Finance, is another key word that has entered our lexicon, joining Bitcoin, cryptocurrencies, NFT, blockchain and meta-currency.