Defi, as we probably know, is an acronym for Decentralized Finance. It is a term used to collectively describe blockchain/open source products that enable direct transactions between peers. As a blockchain-based system, defi is in reality, some set of carefully written codes with defined functions all designed in such a way to allow peer-to-peer interaction between buyers, sellers, lenders, and borrowers. Thus, transactions in defi systems are executed directly between users without need for intermediaries like institutions.
Defi is a direct contrast to the age-old opaque financial system we are all used to. These traditional financial systems involve tedious processes, and are fraught with challenges which all make it more difficult for an average person to experience financial freedom.
For instance, in some parts of the globe, financial services are exclusive privileges enjoyed by the elites while in some other parts, they are unavailable altogether. This situation comes with lots of restraints like inability to get employment or getting paid. Also, some services in financial institutions are only limited to business days and hours; coupled with this, the government and institution can close down their markets anytime they deem fit - even at the expense of their customers. Moreover, the processes of lending, borrowing, and transfer of funds can take several days since such transactions are often processed manually. These services also come with high cost since they normally involve intermediaries/middlemen who would need their cut from every single transaction.
Enter Defi to the rescue!
Decentralized finance is probably the greatest innovation of the century, a technology set up with the primary aim of liberating mankind from the shackles of governments and financial institutions. Defi – and by extension, blockchain technology – not only offers a better alternative to traditional financial institutions and local currencies, but also an exposure to global markets at one’s fingertips
Defi ultimately recreates a Blockchain version of traditional financial systems we know such as banks, insurance firms, cooperative societies, brokerage, etc, complete with their services like savings, lending/borrowing, earning interests on one’s lending, trading, etc.
Defi is a crypto economy with no central authorities, open to all with internet connections, and operational round the clock. It is a global alternative to traditional financial systems, allowing everyone access to similar services offered by such institutions in a few clicks.
Defi Services
· Global transfer of funds/money
· Lending/Borrowing
· Savings
· Trading
· Insurance
· Investing
The above are some of the services available on Defi systems. Expect some of these in our upcoming Defi product, Oreoswap. #Winks
So far, in the defi space, we have witnessed and experienced excellent financial services like never before in the history of mankind. Blockchain-savvy folks from third world nations have resorted to it as a sure means to better their lot, while others see it as a route of escape from high inflations in their countries.
Top Benefits Of Defi
· It ushers in an era of global financial inclusiveness
· Transactions are in split seconds
· Cuts off middlemen/institutions and unnecessary costs
· Easier access to loans without huge collateral, etc
With these huge upsides, it is not surprising that Defi is one of the fastest growing sectors in the cryptosphere
Defi products include swaps/dexes, saving vaults, staking pools, farming pools, launch pads, IDO protocols, etc. These products, being decentralized, are mostly governed and owned by its users, made up of folks across different geographical divides. In essence, Defi is a global and open financial system for the digital age.
Even with its numerous benefits, Defi does not come without its own risks and challenges. We will highlight some of these in our subsequent posts.
Stay tuned.
