What is Decentralized Finance ( DeFi )
Defi is also is known as decentralized finance which leverages existing blockchain technology into a decentralized micropayment platform without any intermediaries. Defi is one of the technological concepts which got huge requirements from the banking sector as well as from those who deal with a large number of the financial transaction. Cryptocurrency transaction is accepted in most of the countries around the world as it facilitates with an easy and fast transfer of money within seconds with an assurance of no middlemen. The DeFi is also known as open finance which is powered by blockchain.
The main problem with the current banking transactions is, it takes time to send money globally and also it charges with a customer service fee for every single transaction, which isn’t acceptable for all customers. Though the transaction fee for a big amount is acceptable, it isn’t that feasible for those who transfer small amounts. The current banking system also puts a bar on the minimum amount a customer can transfer which makes the current banking system all more narrowed.
The most promising feature provided by blockchain for DeFi is a smart contract system. The system acts as a virtual medium between the two customers directly. One can send any large or small amount to another customer by calling a transfer function of this smart contract feature. This enables the user to send the money globally within seconds and no third person is watching that move, instead of that a bunch of pseudo-codes is executing that transfer for every customer.
The best example where DeFi is trustworthy and more efficient is the whale transaction in bitcoin that occurred in 2019, where someone transferred bitcoin of worth 1 billion in seconds.
From the above images, we can see that about 94505.13 bitcoin of worth 1 billion has been transferred and nobody know who did it and, the anonymous person didn’t have to pay a single penny from his pocket as transaction fee. The above transaction is known as whale transaction in a blockchain platform.
The decentralized finance system will power up the existing finance system which is owned by a central authority, also make it automated assuring zero error and no unwanted service fees. The defi has been hot favourite adoption for banking industry where bankers need not to worry about the transaction entry on their private ledger. Moreover, defi is amplified by the smart contract facility which enables each bank to make their own cryptocurrency and track each and every transaction done by their customers.
Continue Reading …….
Originally Published in: https://www.blockchainexpert.uk/blog/what-is-decentralized-finance
