“ DeFi (decentralized finance)”
Hi DeFi enthusiasts!
DeFi, short for decentralized finance, is a movement that aims to use blockchain technology to create financial applications and services that are decentralized, open, and accessible to anyone with an internet connection. Alif DeFi applications are built on top of blockchain networks on Binance Smartchain and are designed to be trustless and transparent, allowing users to access a wide range of financial services without the need for intermediaries like banks or other financial institutions. Some examples of DeFi applications include decentralized exchanges, lending and borrowing platforms, stablecoins, and more.
After Bitcoin’s launch in 2009, a robust industry blossomed, stemming from the asset, its concept and its underlying technology. The crypto and blockchain space boasts different niches in which projects and companies develop solutions for various use cases.
One such niche is the decentralized finance (DeFi) sector, which was created as an alternative to traditional financial services. More specifically, DeFi consists of smart contracts, which, in turn, power decentralized applications (DApps) and protocols. Many of the initial DeFi applications were built on Ethereum, Binance Smartchain and the majority of the ecosystem’s total value locked (TVL) remains concentrated there.
At its core, Bitcoin (BTC) Ethereum (ETH) BInance Coin (BNB) and Others Cryptocurrency carries qualities touted as pillars of decentralization. DeFi, however, expands on those qualities, adding additional capabilities.
A subcategory within the broader crypto space, DeFi offers many of the services of the mainstream financial world in a fashion controlled by the masses instead of a central entity or entities.
Lending may have started it all, but DeFi applications now have many use cases, giving participants access to saving, investing, trading, market-making and more. Decentralized finance’s ultimate goal is to challenge and eventually replace traditional financial services providers. DeFi often harnesses open-source code, allowing anyone the opportunity to build on pre-existing applications in a permissionless, composable manner.
“Finance” is easy to understand, but what is “decentralization?”
In short, decentralization means that no chief body controls something. To an extent, banks and other financial institutions have power over your funds. These entities can freeze your assets, and you are at the mercy of their hours of operation and cash reserves.
The decentralization aspect of DeFi is not only a dispersal of power but also a dispersal of risk. For example, if a company holds all of its customer data in one spot, a hacker needs only to access that particular site for a vast amount of data.
In contrast, storing that data across several locations or removing that single point of failure could improve security.
This article will explain what DeFi means, how DeFi works and throw some light on DeFi trading and decentralized banking.
Decentralized Finance Versus Traditional Finance
DeFi vs. CeFi (Centralized Finance)
For this comparison, commercial banks will be used as an example. In the traditional world, you may use financial institutions to store your money, borrow capital, earn interest, send transactions, etc. Commercial banks carry a lengthy, proven history of performance. Commercial banks can provide insurance and have security measures in place to ward off and protect against theft.
On the other hand, such establishments hold and control your assets to a degree. You are limited by banking hours for particular actions, and transactions can be cumbersome, requiring settlement times on the back end. Additionally, commercial banks require specific customer details and identifying documents for participation.
DeFi is a segment that comprises financial products and services that are accessible to anyone with an internet connection and operates without the involvement of banks or any other third-party firms. The decentralized financial market doesn’t sleep and therefore, transactions take place 24/7 in near real-time, while no intermediary has the power to stop them. You can store your crypto on computers, in hardware wallets and elsewhere, and gain access at any time.
Bitcoin and most other cryptocurrencies hold these characteristics due to the underlying technology that backs these assets. Thanks to DeFi’s dependence on blockchain technology, transactions are completed faster, cheaper and — in some cases — more securely than they would with human intervention. Decentralized finance seeks to use crypto technologies to solve a plethora of issues that exist in the traditional financial markets:
Why is decentralized finance(DeFi) important?
Through a P2P network, DeFi eliminates intermediaries and permits decentralized banking, which wasn’t possible before due to the need to get transactions approved through third parties. The global financial crisis of 2008–09 showed that middlemen cannot be trusted as customers are frequently unaware of the underlying regulations governing financial products and services.
The goal of DeFi is to create an open, trustless and permissionless financial market. Much of the technology in the DeFi space aims to improve the current financial system, potentially improving the user experience (for both businesses and their clients).
Decentralized exchanges (DEXs)
DEXs allow users to trade digital assets in a noncustodial way without the need for an intermediary or third-party service provider. Although they comprise only one element of the DeFi sector, DEXs have been a part of the overall crypto industry for years. They offer participants the ability to buy and sell digital currency without creating an account on an exchange.
DEXs let you hold assets away from a centralized platform while still allowing for trading at will from your wallets via transactions that involve blockchains. Automated market makers, a type of DEX, became prevalent in 2020 and use smart contracts and liquidity pools to facilitate the purchase and sale of crypto assets.
DEXs are typically built on top of distinct blockchains, making their compatibility specific to the technology on which they are developed. DEXs built on Ethereum’s blockchain, for example, facilitate the trading of assets built on Ethereum, such as ERC-20 tokens.
Using DEXs requires having compatible wallets. In general, self-custody crypto wallets let you control your assets, and some of them are compatible with DEXs. However, this type of asset storage puts more responsibility on you for the security of your funds. Additionally, certain DEXs may have fewer features and higher associated financial fees than centralized exchanges.
DEXs have come a long way in terms of liquidity and accumulating a regular user base, which continues to grow. As DEXs become more scalable — that is, faster and more efficient — their trading volumes are expected to increase even more.
How do you make money with DeFi?
Depositing your cryptocurrency onto a platform or protocol that will pay you an annual percentage yield is the most straightforward approach to earning a passive income through DeFi.
Staking is the process of locking tokens into a smart contract in exchange for more of the same token. Yield farming is another way of rewarding yourself with more of the same token or a new token.
Your initial step will be to use a fiat on-ramp to purchase some cryptocurrency (i.e., using cash to buy cryptocurrencies). However, before you proceed with purchasing your crypto, keep in mind that the vast bulk of DeFi is based on the Ethereum blockchain and Binance Smartchain, so BTC is rarely accepted and others Altcoin like Alif Coin.
DeFi use cases
To help answer the question “What is DeFi?” it helps to explore its use cases. Whether you want to lend or borrow, trade on DEXs, stake your digital assets, or something else — even games — there are new ways to satisfy those needs. Below is a list of some of the key use cases for decentralized finance.
Lending platforms
Lending and borrowing have become some of the most popular activities in DeFi. Lending protocols allow users to borrow funds while using their cryptocurrency as collateral. Decentralized finance has seen massive amounts of capital flow through its ecosystem, with lending solutions commanding billions of dollars in total value locked, or TVL — the amount of capital held locked in any solution at a given time.
Is it safe to invest in DeFi?
In general, the smaller a token’s market capitalization is, the riskier it is as an investment. Therefore, look at the liquidity of tokens before committing your funds. Ensure you know how long a DeFi protocol has been in operation and how much money it has in total deposits before you invest.
You can look at its website to see if the company has taken reasonable steps to reduce its risks. You can also look for news items about the protocol being hacked on the internet and their precautions to prevent it from happening again.
To make it clear, there is no DeFi protocol without risk, but the above considerations can help you to evaluate the investment risk before you put your money into any protocol.
“ DeFi DAPP (decentralized finance DAPP)”
Earn reward APR Up to 20% — 30% Alif DeFi Project on Binance Smart Chain.
You can stake Alifcoin, Busd, bnb or you can stake Alif/busd-lp, Alif/bnb-lp, Busd-Bnb-lp.
Alif Staking Pools:
- Deposit Alif earn reward alif Token
- Deposit Bnb earn reward alif Token
- Deposit Busd earn reward alif Token
Alif Yield Farming:
- Deposit Alif/Bnb-LP earn reward alif Token
- Deposit Alif/Busd-LP earn reward alif Token
- Deposit Busd/Bnb-LP earn reward alif Token
Currently, the financial world is undergoing a significant transformation with the development of blockchain technology. One of the most significant breakthroughs in blockchain technology is the development of DeFi or Decentralized Finance projects. DeFi is a decentralized financial system that uses blockchain technology to build decentralized financial applications and products that do not rely on central authorities or financial institutions.
DeFi projects have opened the door for everyone to take advantage of financial products such as loans, investments, and exchanges without relying on traditional financial institutions. As a result, many people around the world have already started to use DeFi projects to gain profits and improve their financial portfolios.
DeFi projects have also opened the door for developers to create innovative and profitable applications and products for users. By using blockchain technology, developers can create products and applications that are more secure, transparent, and decentralized than traditional financial products.
In conclusion, DeFi projects are a significant innovation that is changing the face of the financial world. With increasing adoption and ongoing innovation, DeFi projects promise a bright future for users and developers. Join the DeFi project now and reap the benefits of a more secure and open decentralized financial system for everyone!
Thank you for reading!
