What will we get if we combine the words “digital” and “finances”?
And even if you’re not familiar with Defi, you may guess that this is something connected with cryptocurrency. The truth is that this is a real modern financial approach ( which is now at the stage of extensive development).
Defi is a suitable tool for financial processes ( in the framework of cryptocurrency of course). Such as transactions, lending money, investing, etc. with the help of this application users can count on safe deals because there is no intervention of other participants in between the one who gives money and the one who receives it. Instead, there is a trustful unchanged digital system with the agreed and fixed rules.
Defi can be defined as a net of applications in the blockchain environment. It has all started with a thought, row idea and transformed into a breakthrough, revolution in the financial industry. Defi is a suitable tool for financial processes ( in the framework of cryptocurrency of course). Such as transactions, lending money, investing, etc. with the help of this application users can count on safe deals because there is no intervention of other participants in between the one who gives money and the one who receives it. Instead, there is a trustful unchanged digital system with the agreed and fixed rules.
Professional consulting about the DeFi development can be gained from this IT firm.
In difference from the old-created financial system, Defi was designed to provide you with a safe and multi-functional wallet. Defi enlarges the space for cryptocurrency processes: transaction, exchange on a variety of apps, crypto lending and borrowing; financial transactions without a third person’s involvement (in view of a bank or any intermediary, who wish to control the process).
Defi suggests that you become a full-fledged owner of your money. Defi enables you full control over your money and wipes out the old traditional restrictions of the bank system: minimum balance, financial background, etc. It also cuts the fees (eliminates).
As a user of Defi, you also have your private key. With the help of this key, you can confirm your identity and make a transaction possible. Defi supplies its users with complete privacy.
On the whole, Defi suggests changing the roles. Shifting the ways to perform financial operations is an attractive clue.
Moreover, there are decentralized applications, that operate the process of direct transactions (without a third person). And the key powerful weapon behind the main work of the apps is a smart contract.
Defi works as a Permissionless and transparent (without a third party) financial movement that uses smart contacts to operate the transactions within the applications.
Thus, the most common Decentralized Finance principles are:
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Automation
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Stability
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Security
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Diversity of financial operations;
It’s like substituting a Pet for a robot-pet. The result is: you don’t need to care for its health+ no need to worry about the permission of the owner of your apartment. No difficulties. And the same is for Defi. Defi performs the function/role of the third party in peer-to-peer transactions. While the Traditional Financial system suggests that we entrust the process of money operations to banks, Defi proves reliability by creating a safe environment in view of the safety protocol.
By the way, do you feel the goose-bumps covering your skin when you read notifications from your bank? No surprise, because dealing with banks as your money keepers are tiring from time to time. As a result, we got used to the financial system being torture for people.
There are smart contracts that perform the same function as banks. Smart contracts considered to be the lines of code (within the blockchain) which help us regulate and monitor
In difference from such an old-school system, smart contracts are:
– transparent (no suspicious activity presupposed inside your digital wallet; no funds freezing, abrupt difficulties, etc.)
-safe (strict orders of data processing: as the virtual system performs the leading role. You have to follow the instructions and be reasonable in making decisions through smart contacts and very attentive; In difference from bank consultants/workers, a smart contract isn’t able to hear you out and cancel your conscious decision when you have unforeseen circumstances)
-accessible (if you have an internet connection- you will get access to the distributional ledger)
-controlled (The processed data can be safely stored on the digital ledger. And consequently, the data changes recorded; Cannot be stolen; And cannot be deleted simply. As the data owner, you supplied with an authority. And there is the opportunity for you to change anything with the help of a security key. According to this, you have your digital wallet and don’t have to make bank systems be your money keepers)
-traceable and faster in use (Transfer in few clicks. You don’t have to wait for someone on the other end of the line to answer you. No more irritating calls that you usually make in search of current information about your card being after sanctions. And the same thing comes to the general information that banks usually possess. In this case you are nothing much but a client. You’re dependent on the technical works, which is why usually you have to wait!)
-Non-flexible (you are deprived of buying products for cryptocurrency or paying for services; non-scalable);
-Risks exist 1) risks of being hacked (as far as the financial processes held on the Internet);
2) accidental loss of money (this is not an exclusion when someone loses his money because of a system error);
-Not as secure as the traditional financial system (because there is no central authority)
-Non-stable (crypto prices vary: their value constantly changes)
Generally speaking, we can come to the thought that the main advantages of Decentralized Finance are sometimes play the role risks
In our days, this innovation is a breakthrough. Still, even with an effect of amusement, Defi appears to be a black cat in a black room for some people. Sounds good with all of these possibilities and advantages that the Defi principle suggests. It remains theoretical for many people.
The Defi approach requires the user to choose between taking risks or following the old viewpoint.
Thus, while previous generations have become accustomed to
safety with inconvenience and too many obstacles in exchange for
guaranteeing stability, the modern approach has a slogan: all or nothing!
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