forbitspace

<p>DeFi can be the answer here, but finding the best opportunities within this nascent space and ensuring that your assets are always allocated efficiently is a task that is virtually impossible to do manually. However, this DeFi market has cooled down. Data from DeFiLlama shows that the overall value of this market has now dropped to around $40 billion. Nonetheless, experts remain bullish on the potential of decentralized finance. CZ and Saylor also advise people to use crypto self-regulatory platforms. This causes the cash flow to run away from Cex to pour into Dex. </p><h2 id="header-0"><strong>What is DeFi?</strong></h2><p>DeFi, short for decentralized finance, is a general term for peer-to-peer (P2P) financial services on public blockchains, primarily Ethereum. P2P financial transactions are one of the core premises behind DeFi. A P2P DeFi transaction is where two parties agree to exchange cryptocurrency for goods or services without a third party involved.</p><p>DeFi gives you classic banking services (earnings, borrowing, lending, insurance, trading derivatives, and assets...) but with higher speed, paperless, and without intermediaries. Like most cryptocurrencies, DeFi is international, peer-to-peer (P2P) (it allows two people to transact directly with each other without going through a centralized system), anonymous and open to everyone.</p><h2 id="header-1"><strong>DeFi with CeFi</strong></h2><p>CeFi - Centralized finance is the default financial environment in which the world currently operates, with payments, loans, and trading activity passing through third parties and middlemen that are heavily supervised by local regulators.</p><p>CeFi platforms saw tremendous growth in 2020 and 2021. At this time, “DeFi as a service” grew in popularity and many of the CeFi platforms were managing billions of dollars on their customers&#39; behalf.</p><p>In the past, there were many Cex bankruptcies. But by 2022, when the crypto industry was on the rise, Cex collapsed even more. Typically in the summer of 2022, popular CeFi platforms Celsius Network and Voyager Digital froze customer funds. The lending standards of these platforms were not up to par and the companies lost many of their customers&#39; funds.</p><p>This was due, in part, to extreme market conditions (the market cap of crypto has fallen nearly 60% from the high) and lack of proper risk prevention measures. Celsius and Voyager have since declared bankruptcy, causing depositors to have their accounts frozen and their ability to withdraw their money from the platforms restricted.</p><p>DeFi platforms, however, have been operating without issue. DeFi, on the other hand, delivers a whole host of advantages by enabling people to transact through financial applications via a blockchain network, cutting out intermediaries, such as traditional banking groups.</p><p>Eliminating middlemen naturally cuts costs and speeds things up, but DeFi also makes financial services much more accessible. In the world of centralized finance, not everyone is allowed to open a bank account or be given access to specific financial services. DeFi therefore has the potential to financially empower billions of people around the world who are currently denied access to banking services.</p><p>DeFi also has the advantage of providing more flexibility, for instance with trading hours not being limited the way they are with centralized finance.</p><h2 id="header-2"><strong>DeFi&#39;s application</strong></h2><p>The most popular types of DeFi applications include:</p><h3 id="strong-decentralized-exchange-dex-strong"><strong>Decentralized exchange - DEX</strong></h3><p>Online exchanges help users exchange currencies for other currencies, whether U.S. dollars for bitcoin or ether for DAI. DEXs are a hot type of exchange, which connects users directly so they can trade cryptocurrencies with one another without trusting an intermediary with their money.</p><h3 id="strong-wrapped-bitcoin-wbtc-strong"><strong>Wrapped bitcoin (WBTC)</strong></h3><p>A way of sending bitcoin to the Ethereum network so the bitcoin can be used directly in Ethereum&#39;s DeFi system. WBTCs allow users to earn interest on the bitcoin they lend out via the decentralized lending platforms described above.</p><h3 id="strong-prediction-markets-strong"><strong>Prediction markets</strong></h3><p>Markets for betting on the outcome of future events, such as elections. The goal of DeFi versions of prediction markets is to offer the same functionality but without intermediaries.</p><p>In addition to these apps, new DeFi concepts have sprung up around them:</p><h3 id="strong-yield-farming-strong"><strong>Yield farming</strong></h3><p>For knowledgeable traders who are willing to take on risk, there&#39;s yield farming, where users scan through various DeFi tokens in search of opportunities for larger returns.</p><h3 id="strong-liquidity-mining-strong"><strong>Liquidity mining</strong></h3><p>When DeFi applications entice users to their platform by giving them free tokens. This has been the buzziest form of yield farming yet.</p><h2 id="header-3"><strong>Strengths of DeFi?</strong></h2><p>Using DeFi allows for:</p><h3 id="strong-accessibility-strong"><strong>Accessibility</strong></h3><p>Anyone with an internet connection can access a DeFi platform and transactions occur without any geographic restriction.</p><h3 id="strong-flexible-fees-and-high-interest-rates-strong"><strong>Flexible fees and high-interest rates</strong></h3><p>DeFi enables any two parties to directly negotiate interest rates and lend money via DeFi networks.</p><h3 id="strong-security-and-transparency-strong"><strong>Security and Transparency</strong></h3><p>Smart contracts published on a blockchain and records of completed transactions are available for anyone to review but do not reveal your identity. Blockchains are immutable, meaning they cannot be changed.</p><h3 id="strong-autonomy-strong"><strong>Autonomy</strong></h3><p>DeFi platforms don&#39;t rely on any centralized financial institutions and are not subject to adversity or bankruptcy. The decentralized nature of DeFi protocols mitigates much of this risk.</p><h2 id="header-4"><strong>Conclusion</strong></h2><p>Blockchain technology and DeFi is relatively a nascent technology. But due to the increasing interest of governments, corporations, and financial institutions around the world in the implementation of this technology, and the many projects that are being examined and evaluated globally, it is very likely that in the foreseeable future – 10 to 15 years from now – DeFi will be the “rails” of all financial products and services.</p><p>As the technology matures and projects are tested and examined thoroughly, DeFi products and services will become compliant and secure and with the appropriate auditing and monitoring, to ensure users’ security and privacy. This is essential for any technology to become mainstream.</p><p>This transition is taking place, and DeFi shouldn&#39;t be thought of as an interesting concept, but an active transformation that is taking place as we speak. DeFi is indeed the future of finance. </p><p></p><img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/d45f87c68cb14e2bbf0bb740e2739768.png" /><p></p><p></p>

DeFi - Definition Of Financial Future

Table of Contents

forbitspace

Other articles published on Dec 22, 2022

Zentachain — Year Summary

Is YFI A Good Investment For Future?

Users with MATIC BEP2 in Beacon Chain can now Deposit on Binance Account

Alameda had a "Speed" Advantage On FTX: CFTC

It's a ‘No Bail’ for SBF

♠️ Become Liquidity Share Holder and earn 5% Fee (Share of the Pool ) on each transaction - LP REW...

Join our free newsletter for daily crypto updates!