10 Undeniable Reasons to Love DeFi
Here is what DeFi bring to the table
Decentralized Finance is picking up a lot of attention these days and it’s not just because it is enabled by blockchain technology.
But how it will allow us to shape our finances in entirely digital order.
Bitcoin and Ethereum are originally DeFi applications.
Now you are gonna see why we love DeFi and why should you but first, let’s talk about DeFi.
DeFi or Decentralized Finance system is the next-gen financial services built and enabled by blockchain technology which has been here for some time.
The main goal of DeFi is to replace our current centralized financial system which has a lot of disadvantages.
Now, why do we need that? Read below:
1) Decentralization of financial services:
As the name says itself, Decentralization means no one authority is in charge, just like the internet there is no centralized connection and everyone can use it without asking anybody.
“The goal of DeFi is to reconstruct the banking system for the whole world in this open, permission less way” -Alex Pack
This is useful as sometimes the gatekeepers become the problem itself.
Programs are created every day to cut the middlemen and in this case, DeFi can do the same with your finances.
Since it can be related to the early phases of the internet you can understand where DeFi is thinking of it as internet during the 90s, only the pros were operating it, people use to hire high fee developers, the UI sucked, systems lack simplicity.
But after the dot com millionaires came in they attracted VC, investors and over time the internet became much more simple and now it could be operated anywhere, same is with DeFi the goal is to get it in the hands of everyone.
2) Transparency:
A big loophole in the banking systems is transparency which often creates a window of malpractices etc.
But in DeFi the code is transparent which is useful for anyone who wants to audit and see for themselves if this is what was promised.
Things like this create trust from users, every transaction is publicly visible on the blockchain verified by other users.
This also helps to find out new platforms like Ethereum and help build better protocols.
3) Efficient and healthy system:
Last year Covid-19 has shown us how centralized finance systems are vulnerable to global pandemics like this.
As it requires physical contact between banks and users, and even though internet banking and various things can go digital, there is still a large portion of things that can only be done physically.
This had made some people’s lives troublesome, DeFi can be figured out to be worked with almost no physical contact, and even in a pandemic like this crypto can thrive.
4) Better Security:
By using cryptography and algorithms cleverly blockchain can achieve true immutability.
Which can ensure that manipulation of records stored in blockchain networks is almost impossible.
Using DeFi in the physical world can prove to be useful for those who suffer financial discrimination or border-less transactions.
5) Flexible user experience:
Customization has been a useful thing for us all whether that be our smartphone home screen or systems.
If you don’t like the current interface of the Dapp (Decentralized application) you can use a third-party interface like you use skins in games.
Or if you are up to it you can even build your own.
“Smart contracts are like an open API that anyone can build an app for.” — Coinbase
As mentioned in this post DeFi could be imagined as the internet in the early days, but it took a lot of time for the internet to be user-friendly, but DeFi can go much faster in updating GUI.
6) No permissions no worries:
Creating an environment where fewer permissions are asked can cause disaster if not managed well.
But in finances, people should have control over their money, but in our traditional finance systems, you need to ask before you could do something.
So DeFi allows you to use the services without any permissions which can sometimes cause a delay in the banking systems.
7) Faster transactions:
Transactions like buying, selling or trading are faster because of the right systems in the places.
By cutting out the human errors and giving less area to corruption the transactions can be done globally quickly.
Blockchain is already a highly anticipated technology that can build faster responses in our finances.
8) Lending:
If you have been in crypto you would know that crypto loan is becoming a great business for people.
People can simply use their funds as collateral and could easily borrow without worrying about their credit score.
This process involves using smart contracts which eliminates the middlemen like banks etc while ensuring smooth transactions from both sides.
This is a good thing for so many people who struggle to get their loans just because their credit score doesn’t have a good history.
Now you can see how DeFi cuts the use of the major banks.
9) Lack of mismanagement:
Human errors and mismanagement create disasters in finances and solving that would be a huge achievement for all of us.
“We have already mentioned that financial crises occurred due to the mismanagement of central banks(CBs) and third-party intermediaries (TPIs). But thanks to smart contracts, human error on a day-to-day basis are removed from the process; unless the contracts themselves were poorly written.” — TrustPilotfgf
Smart contracts are one of the biggest features of crypto that helps both parties conduct transactions fast and securely.
There are no employees in DeFi instead there are rules written in codes and as mentioned because of the transparency of the system it can be easily audited.
10) Innovation in finances:
Using DeFi makes you part of a global experiment that will be changing the world in finance.
As blockchain specialists rise and create Dapps like Ethereum we will be cutting out middlemen forever.
DeFi is becoming a fast-growing industry, take a look at Daily Ethereum value from August 2015 to May 12, 2021
However, the DeFi has not gone completely mainstream yet and the day it will, it would be globally available to everyone.
Anyone would be able to make payments across the globe in few taps without asking for permission or being hung because of politics or mismanagement.
Thank you for reading!
