If you know the current scheme of the cryptographic industry, you should have come across DeFi (Decentralized Finance) at least a couple of times. Between 2020 and February 2021, users had invested nearly $ 20.5 billion in various DeFi protocols.
Investment statistics gives you an idea of how fast decentralized finance is moving in today’s cryptocurrency economy.
We are talking about a system that is a preferred alternative to today’s traditional banking. But before you continue, you may want to better understand DeFi. Let’s go straight!
What exactly is DeFi?
DeFi is the acronym for Decentralized Finance. It is a blockchain-based financial technology, independent of traditional financial intermediaries, such as banks, stock exchanges, and brokerages, to provide financial services to its users.
The DeFi system is a practical financial system that provides more than could ever be expected from traditional financial intermediaries.
For example, you can lend and lend on DeFi platforms, as well as predict price changes in various assets, insure against risks, trade cryptocurrencies, and earn interest.
In addition, some DeFi applications offer high interest rates, which often involve proportional risk factors. DeFi exposes you to global markets and more viable alternatives to your banking options and your local currency.
We are talking about an open financial system that depends solely on technology as an alternative to the comparatively slow, manipulative, monopolistic and legalistic banking system.
DeFi takes out the financially blindfolded eyes that financial intermediaries put on you.
In other words, it takes you to the heart of the technology that determines the outcome of your investments. So you can view and control your resources in a blockchain.
In addition, DeFi brings financial services to the door of the average person.
That is, you are only an Internet connection to be part of the technology that will put you at the center of your financial investments.
That said, it’s no wonder DeFi quickly overtakes the current banking system. However, we explore the following reasons:
1. Low interest loans
As you may have known, the government or other third parties control virtually every aspect of the current banking system.
As a result, you will have to go through financial investments to access all sorts of funds, from mortgages and car loans to stock and bond trading.
The absence of financial intermediaries in blockchain networks greatly reduces the interest on loans. U.S. regulatory agencies, such as the Securities and Exchange Commission (SEC) and the Federal Reserve, set standards for brokers and centralized financial institutions.
These rules are subject to congressional amendments and significantly destabilize interest rates. Therefore, the centralized system creates unstable rates, especially for individuals and small businesses seeking loans.
However, decentralized financing directs you directly to chain financial services and away from banks, lenders and stock exchanges that get their reduction from your banking and financial transactions.
This means that you are protected from the crazy hidden commissions involved in banking transactions.
Credit checks do not determine DeFi interest rates. Instead, DeFi protocols set universal rates and all you need is enough collateral to access a loan.
2. High return on investment
In contrast to the very low return on investment to traditional banking customers, DeFi offers users incentives for their financial activities. A typical example is participation, which involves lending or investing your digital assets in a participation testing platform.
You can get substantial amounts of rewards as long as you lend your digital assets. DeFi allows lenders to own the interest that would normally belong to the bank or brokerage.
The best ROI is evident in the move by Coinbase and Compound Treasury to launch USDC-based loans, loans that return a minimum yield of 4%.
Current traditional financial offerings do not coincide with such a reasonable return on investment. Surprisingly, DeFi platforms offer companies in-depth geographic access at much more variable rates, which would not otherwise be available.
Meanwhile, the rapid growth of loan products is mainly influenced by individual holdings and personal trading of cryptographic assets. In addition, large banks such as the Bank of the United States and Morgan Stanley now provide their wealth management clients with cryptographic products.
3. A transparent financial system
People who access financial services require a system that gives them the advantage of supervision to better control their investments and transactions. And fortunately, blockchain technology is today a reliable source for financial activities.
Users have more control over their digital assets and see their location and storage usage. Supervision of digital assets makes DeFi a transparent financial system.
In addition, a transaction is permanently registered in the blockchain when deploying smart contracts and becomes permanently unchanged.
In addition, the system only executed operations when both trading parties complied with their part of the agreement, a popular example being P2P (peer-to-peer) trading.
4. Open access to financial services for all
DeFi should go with the motto “Finance for all”. This is just a suggestion anyway. But DeFi breaks the rules by creating an open-door financial system for everyone, regardless of credit history, equity, geographic location, or class.
Thus, you have access to a more complete financial system if the banks reject you. While banks and financial institutions are closing in to save money, DeFi is moving forward with a reckless push.
And by reducing the barriers that mitigate access to lending, DeFi is gaining wider acceptance among those banks, lenders, and intermediaries not meeting their financial needs.
As it stands, the famous quote from Bill Gates: “Banking is necessary; the banks are not ”, it cannot be more valid.
5. Autonomy of investment and ownership of assets
You have full ownership of your funds as a participant in decentralized finance. In the absence of intermediaries, you are your own boss. DeFi makes you a sole proprietor, so to speak, and you can invest and get reasonable returns on your investments.
It’s also exciting that DeFi offers you several options for your digital resources. You can participate, lend, borrow and save digital assets.
For example, you can bet on your cryptocurrency Yefi.one—A DeFi betting platform for earning passive interest when you invest your cryptographic assets in its decentralized application (YeFi DApp).
YeFi DApp gives you a fun and intuitive way to earn passive income with your cryptography. The YeFi platform stands out for its security and you can get an APY (annual percentage return) of up to 80% on your cryptographic investments.
6. Environmental sustainability
The minting of paper money around the world has led to the continuous felling of trees, which has increased the saturation of greenhouse gases in the atmosphere. And according to the United States Mint, finished 40,000 tons of metal go make coins in the country annually.
Decentralized finance is a move away from physical currency to digital currency. And while DeFi activities in blockchains can still release a substantial amount of carbon into the atmosphere, several solutions are creating ways to counteract or minimize emissions.
For example, Popcorn provides a carbon-neutral DeFi platform where investors promote carbon-neutral transactions and get high returns on their investments.
Popcorn is one of the few socially responsible DeFi companies where you can choose to “do well” or donate your profits to their decentralized social impact program.
Popcorn’s carbon-neutral savings account demonstrates that the company has a conscious DeFi model that considers the carbon footprint of blockchain activities. You can invest in popcorn and start earning high returns on your cryptocurrencies.
You’ve seen how decentralized finance wants to displace traditional banking and take over with its more advanced technology-oriented system.
From low-interest loans and high ROI to open access and all-inclusive financial services, there’s no better time to join the DeFi train than now.
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