What is DeFi ? How it will disrupt the financial services?
Decentralized finance — or DeFi for short — is a decentralized model for financial services like investing, borrowing, lending and trading. It is built on non-custodial infrastructure. While Blockchain taught us the decentralised way of doing the things, DeFi is the real example of decentralisation in the world of finance.
While the financial services through banking channel is centralised and the users of the customers do not have full control over it. DeFi is the de-centralised world of finance, everyone is welcomed with their financial allocation. Users can control their own assets. Moreover, users are in control of their own assets.
DeFi is based on the blockchain technology, users have all the relevant information stored transparently on the blockchain network. They have all the relevant information stored transparently on the blockchain and, thus, can make the best decision possible.
May DeFi projects introduced blockchain-based Decentralized Autonomous Organizations, which enable users to become the decision-makers and project beneficiaries rather than passive consumers. It ensures the DeFi project is evolving according to the users’ needs and not according to what the founding team wants.
DeFi is a tool for disrupting the financial ecosystem. With the decentralized DeFi, the financial benefits can be made accessible to the weaker section of the society. Traditional banking and financial services, involves various internal process and approvals, DeFi negates these intermediaries and it brings a more efficient banking & financial solutions with a greater transparency.
DeFi applications are built on open-source blockchain protocols like Ethereum. Multiple dApps catering to different financial services from loans to insurance can be created through DeFi protocol. Moreover, existing data can be transferred to a decentralized network thereby facilitating interoperability between different platforms.
The year 2020 was dominated by DeFi projects. DeFi has the potential to take away power from centralized institutions and instead place it in the hands of the community. Moreover, DeFi does not only enable a transformation in the existing systems but also propels new technological innovations in the finance sector.