The Rise and Rise of Decentralized Finance (DeFi)

The Rise and Rise of Decentralized Finance (DeFi)

At the height of the COVID-19 pandemic in 2020, something unique happened: the “emergence” of decentralized finance (DeFi). Although it had started a few years earlier, DeFi became more pronounced in 2020 by proving that everyone could get assistance when banks close their doors. 

After the pandemic, DeFi is now the go-to option for most financial services. By the close of 2021, the total amount locked in DeFi platforms had reached USD 346 billion. If you can get the service in a bank faster and more affordably, why go to a bank? DeFi has become the turning point, and experts predict it is going to become the future of finance. Keep reading as we dig deeper into DeFi to demonstrate why it is the future and the main reasons for joining now. 

What is DeFi? 

Decentralized finance (DeFi) heralded with the rapidly growing list of Ethereum blockchain’s features, especially the trusted framework for deploying computer codes and writing instructions. This framework is used for controlling digital assets to create new financial products. Therefore, just like banks offer financial services, such as loans and mortgages, DeFi can do exactly that, but in a different way. 

In DeFi platforms, there is no intermediary that is involved. Here, banks are replaced by permission-less models, where transactions are processed by nodes on the respective blockchain networks. They also use smart contracts that automate all agreements. 

To demonstrate DeFi’s effectiveness, let’s look at smart contracts. Most services on the DeFi platforms are provided for by smart contracts, which are self-executing. This means that you do not need a bank or lawyers to complete a contract. The contract self-executes once all the terms and conditions are met. Again, there will be no need for arbitration because the terms and conditions on the smart contracts are permanent.

Benefits of Using DeFi Platforms

Decentralized finance (DeFi) platforms are created to help simplify access to banking services. As far as you can access the internet, it is possible to access banking services on DeFi. There are no restrictions such as those put by banks on people who can access the services. For example, you do not need to be employed to get a loan on DeFi. If you have some coins, accessing a loan is easy and fast. Other benefits of DeFi include: 

  • Helps to simplify the process of getting financial services. 
  • Offers users multiple channels for investing their funds for high returns. 
  • The cost of financial transactions is cheaper and simplified in DeFi platforms and blockchains networks. 

What Services are Available in DeFi? 

Although DeFi platforms are relatively new, they have grown rapidly and are now offering almost all the services you can get in a traditional bank. Here are the main services you should expect from a DeFi platform. 

  • Staking: This is the process of locking your coins to help with transaction validation in blockchain networks. Only proof of stake (POS) coins, such as ETH and ADA, can be used for staking. 
  • Crypto borrowing: This is a method of taking a loan from a DeFi platform with your crypto coins acting as collateral. This service is pretty easy and you can secure a loan within a very short time since there are no background checks.
  • Crypto conversion: If you want a specific type of coin but have been wondering how to change it to a different one, a good DeFi can help. For example, some people have been using DeFi platforms to change their BTC to ETH for buying non-fungible tokens.

If you want to know about the future outlook of finance, simply look at decentralized finance (DeFI). The platforms have simplified how people access banking services and opened doors to people who were previously locked out by traditional banks. As more people join and start using cryptos, you should also join, and it will be an excellent idea to have a professional on your side. Visit hi.com for all you need about cryptos, including buying, selling, and earning from coins.  

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