What would you say to a period that allows you to grab non-collateralized or under-collateralized loans without even knowing the lender? Some utopian era isn’t it? Guess what, that era just ascended and people have a name for it, DeFi. The buzz word gets to buzz even harder with the concept of “Yield Farming” “Cumulative Interest Compounding” “Liquidity on Liquidity” magnetizing the crypto-investors and the community. To those who haven’t yet well-wired themselves to the banking system and are missing out on a tremendous earning opportunity via investment, DeFi sets the tone for such folks.
How Does DeFi Make that Possible?
Before, we land to the “How’s”, let’s first explain to you the “What’s?” So, what’s DeFi? DeFi in short or Decentralized Financing is a peer-to-peer open-source financial system that allows performing the traditional CeFi or Centralized Financing activities like lending, borrowing, structuring derivative products, or buying sans complexities involved in a decentralized environment. Specific programmable codes powered by the smart-contracts automates loan lending, loan approval, interest compounding, interest transfer, remittance, and market exit. A three-layered architecture named: The underlying layer, the protocol layer, and the application layer provide higher operational efficiency with maximum governance and minimum interference to bolster transparency, safety, and security on the platform.
Coming back to the “how”, DeFi collaboratively brings everyone inside the financial system. The vision behind that purpose is to “bank all the unbanked” people on the planet. That said, it has the prime potential to transform the developed or under-developing nations ravaged by rapid inflation, massive currency fluctuations, the government restrictions during the ongoing CoronaVirus Pandemic to generate higher yields from asset trade. Anyone with an Internet connection in any part of the world can access the DeFi market without the need for complex documentation or stricter regulatory processes acting as a roadblock to envisage financial inclusion.
What Are the Advantages of Using the DeFi platform?
- It is permissionless
- Trustable (No Centralized Participation for breach or fraud issues)
- Resistive to Censorship
- Low-Cost Transactions for trading, transfer
- Very Fast & Agile System
How It Can Unbank the Banked & Re-Bank to DeFi?
Incentivized Saving Account
Almost the universal saving rates across economies vary between 0.01% to 1% maximum. With 1% being the highest figure given in any economy. Comparing the same with DeFi Exchange, MakesDAO DAI Tokens is currently priced at a 2% interest rate. The best part, you can stake coins and yield farm or also known as lending cryptos to earn interest.
The hassle of loans bites the dust in the cryptosphere. After all those lengthy documentation and cross-checking, you get loans at unethical higher interest rates of 14% to even 20%. DeFi market makes that happen at 3% or 4%. Take, for example, Dharma, Compound, Salt, Ethlend, and dydx that are providing loans at such interest rates with marginal collateralization.
Typical banks store huge personal data on a single server waiting like a sitting duck for a raid. DeFi, since being decentralized, stores it on multiple servers, making them non-hackable, safe, and transparent.
There’s a lot of reasons to believe why DeFi is hailed as the game-changer in finance that can rectify all the odds in the existing financial system. But that being said, as a conceptually new market evolving with the passage of every single day, experts in the domain can help take up smart investment portfolios. DeFiMe Financial Medium offers smart a comprehensive consultancy service to help new and emerging ideas be backed using crowdfunding. Our rich market expertise helps new smart projects to raise funding keeping in mind the compliances. Investors, startups, and FMCG owners can list their projects on DeFiMe to opt for the funding. Feel free to contact for support or write to us on firstname.lastname@example.org
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