What is Decentralised finance? Complete DeFi Overview and outlook. 😇

Decentralizing finance takes components of traditional finance and decentralized them by removing middlemen and replacing them with smart contracts.

Example of Decentralized finance?

Decentralized loans and earning interest however giving you the impression that defi products and services are truly decentralized elements of the current defi ecosystem are heavily centralized the reason why is that many defi services or products have a central company behind them creating the smart contracts instead of the way I like to think about defi is that its non-custodial finance where you don’t need to trust a third party like a bank with your money.

The marketing department at defi projects would take issue with having to throw around the term non-custodial finance.

How does interest work 📈 📉

Generally two types of interest.

1.Simple interest💵

2.Compund interest 💵 💴

DeFi protocols usually depend on user actions to calculate the interest.

What is non-custodial?

non-custodial implies that you continue to hold the keys to your crypto and don’t trust them with a middleman sort of a banker. Decentralized finance is all concerning building additional complicated monetary systems on high of the blockchain and enabling them to figure therewith store important that currency that payment system the cool factor is that blockchains that support smarts contracts alter you to participate in things like loans collateralized debt and fundraising all this whereas being outside of the standard industry. the redistributed finance system well the foremost common use cases area unit borrowing cash and provision cash to earn interest the key factor to notice concerning confiscating a loan or borrowing cash in defi is that it is not constant as obtaining a loan from your bank wherever you primarily bring future money flows forward to nowadays loans among redistributed finance.

Example of Defi:

E.g Local pawnbroker: customers can take an item like a car musical instrument piece of jewelry or any item of value to the pawnbrokers and receive a loan based on the value of the item the pawnbroker might lend you 50% of the value of the item charge you interest and if you miss your repayments they might sell your item to recoup the value of the loan pawnbrokers will always lend you less than the value of the item you’re putting up for collateral and this is known as an over collateralized loan borrowing in defi is similar to this to get a loan you need to bring collateral. this case cryptocurrency and that’s locked up in a smart contract called a collateralized debt position or CDP the thing to know is that if you’re borrowing money in defi it will be over collateralized and if the value of your collateral falls too much you can have your crypto liquidated by the CDP to cover the loan. the thing about defi is that it essentially enables you to access many financial products or services without having to KYC or get approval from anyone it doesn’t use credit scores or discriminate based on the location you live in Short defi opens up financial products you’re interested in earning your interest on your crypto then a good place to start is compound finance with over 137 million dollars worth of crypto assets earning interest on the platform it’s one of the most popular lending platforms out there and after using it myself I can certainly give it two thumbs up in terms of defi trading platforms .you have the likes of the dy/dx exchange which offers non-custodial margin trading currently. You can only trade earth and die if you SDC and die USD trading pairs however more assets will probably be supported in the future what the platform enables you to do is short or long aethalium with a meta mask wallet that means that you can trade having full control over the keys to your crypto and does away with the need to trust a centralized exchange. That could run off with your fund’s token sets calm is a pretty interesting platform that offers Robo sets, in a nutshell, these automate your crypto portfolio management and you can select the trading strategy of your choice so let’s say that we’re bullish on Defi .we think will do well seeing that the vast majority of projects are built on anthurium we might want 75% of our portfolio in the earth and 25% in Bitcoin the problem, of course, is that it’s a pain to have to constantly rebalance your portfolio the cool thing with token sets is that you could just get the earth Bitcoin 75% 25% wait set and the token set would automatically rebalance the waiting every month for you a pretty nice solution to save crypto holders time and effort now that I’ve talked about a range of different products and services that make up the Defi ecosystem I’d like to move on to exploring the future of decentralized finance.

Decentralized finance according to the bank 🏢:

The decentralized finance movement is the possibility to completely democratize access to financial services according to the world bank an incredible 1.7 billion adults in the world don’t have access to a bank account in other words the world banks have excluded 1.7 billion adults from access to basic financial services like access to loans. currently, defi loans need to be over collateralized however it’s probably only a matter of time before some under collateralized loan alternatives will emerge. I do loan reputation system coming about in the near future one that’s recorded on the blockchain and which enables people to get access to under collateralized loans a bit like how a bank lends you money for a mortgage after you’ve put down a deposit for a house however the key thing here is that a bank account would not be needed the greedy banker would not cut out and the world’s unbanked population could get access to these financial services with just a few taps of their smartphone another major stumbling block to democratizing access to financial services is actually reducing the friction to transfer value into and out of the crypto universe how on earth is a non-banked person going to trade their local currency for crypto to participate in the defy ecosystem well one way is to use a service like local bitcoins and just do a real-world peer-to-peer exchange.

Conclusion:🗣

DeFi systems make use of the codes and the protocols for process automation which distinguishes them from the traditional financial products. Thus decentralized finance could very well be the next emerging thing in the blockchain platform.