Decentralized finance or DeFi is a blockchain-based financial system that uses cryptocurrencies and blockchain to manage financial transactions instead of relying on central financial intermediaries such as banks, brokerages, exchange houses, etc.
DeFi is growing at a very fast phase. The industry has reached $ 100 billion and its users are over a million now, which shows people’s motivation and enthusiasm to participate in such a system.
With such a surge in popularity and adoption rate, people are wondering if DeFi may be the next big thing in global finance. In this article, we’ll take a look at the reasons why decentralized finance can disrupt traditional banking.
Accessibility
Unlike traditional banking, Decentralized Finance offers users simplified and easier access to banking services. It also removes barriers by eliminating the need to share personal information before accessing services.
For example, with the traditional banking system, a person in need of a loan would have to go through a bureaucratic process and waste a lot of time, however, in the case of DeFi, such operations require only several clicks and are accessible from anywhere and at any time. This approach not only makes the process seamless but also affordable, giving users full control of their assets.
Transparency
Because DeFi is powered by blockchain technology, all transaction data is transparent and available to everyone. Such auditable nature of DeFi allows parties to properly assess risks and inspect portfolios
Therefore, DeFi’s open source infrastructure is always available for audit, with every transaction recorded on the blockchain. This not only serves as an important foundation for financial markets but also plays an essential role for investors.
By understanding what types of transactions are taking place, DeFi provides its users with a high level of trust, a sense of security and authenticity.
Exchange
DeFi simplifies the exchange process as it involves peer-to-peer transactions without the need for a middle man or middleman. DeFi platforms are equipped with machine learning algorithms that help detect fraud and identify other risk factors.
With the help of smart contracts and analysis on loan sources, credit levels, etc., DeFi platforms speed up the exchange and lending process between two parties. That’s why DeFi exchange and lending is one of the fastest-growing use cases in the industry.
Innovation
Decentralized finance is one of the most innovative industries. Built on blockchain technology, DeFi solutions are innovative by nature. However, in addition to that the industry is constantly looking to expand its capabilities and offerings with innovative solutions.
Exactly such groundbreaking thinking made DeFi a perfect use case for doing everything from lending to insurance. And as the decentralized finance becomes more attractive to large investors and businesses, we are more likely to see more innovative and complex uses of this space.
Conclusion
Decentralized finance is receiving increased recognition from users, as well as potential partners, such as international payment providers. It has grown so much that even traditional financial institutions recognized the potential of DeFi.
Although DeFi is still considered a new and experimental solution, everyone agrees that DeFi is here to stay and has the potential to disrupt traditional banking.
