What is Decentralized Finance?

Decentralized Finance

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Blockchain technology has not only raised the popularity of bitcoins to new heights. It has also contributed a lot to several other financial service sectors, one of which is decentralized finance.

No one expected the technology adopted in the bitcoin-based operations would be so effective that it would become a challenge for the existing financial services in the market. However, something unexpected has happened after the emergence of DeFi, as the financial sector has become more robust, and people are ready to switch to decentralized finance by avoiding the use of traditional systems meant for fiat currency.

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The inclusion of Defi Finance has wholly transformed the traditional financial services by developing a unique peer-to-peer network where there is no interference of any kind of higher authority. Decentralized finance has attained an excellent response from the public, which is why it has become a trend, and full credit of this goes to the bitcoins.

Benefits of DeFi

Permissionless

The most fascinating feature of DeFi is that there is no need for any kind of permission to perform transactions or any other actions. The blockchain moves on the path of decentralization, and this is something unique that takes place in decentralized finance-based transactions. The traditional currency is free from relying on any kind of financial authority or corporations for taking approvals. 

It reduces the overall processing time, but the interference of any unnecessary personnel is avoided, which is the best thing. Even the transaction that has taken place will be available in the shared ledger, which means that there is easy access to service by anyone. The unique part is that permissionless nature also invites the presence of an endless number of third-party integrations without any kind of doubt.

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Transparency

 Decentralized finance comes with best-in-class transparency. It simply means that not even a single piece of information is hidden from the users performing the transactions using the DeFi network. Blockchain technology does not offer any kind of invisible operations that prevent any chance of confusion among the people. Any of the processes that took place at the network is incomplete knowledge of the users. 

Even if any user faces doubt regarding the transactions that occurred in the past, the public ledger has a record of every single transaction which is fully verified. The people who have adapted the DeFi are well satisfied. It is mainly because they can easily identify if there is the possibility of any scam or fraudulent act. More transparency in this era leads to better trust among the people, which is a great thing.

How does DeFi contribute to the financial service sector?

 There is no doubt that Decentralized finance has contributed to the financial service sector in a very fantastic manner. DeFi has the real potential of upgrading the traditional financial sector to meet the requirements of the modern sector.

Lend and Borrow service

DeFi has done one of the best things where the peer-to-peer networking of transactions promotes lending and borrowing much easier. This is because intelligent contract integration prevents the participation of any kind of intermediary and agents.

It reduces the hassle and lengthy formalities, which saves a lot of time. The best thing is that lending and borrowing happen very economical and instant, and the transactions are fully protected. 

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Saving

The high demand of the DeFi has also admired the users for offering more opportunities of saving the potential users. If the users have any valuable assets like bitcoins or other cryptos, you can keep them to earn the compound on it. People have claimed that they have earned an outstanding amount of interest which is worth satisfying.

The saving platform based on the DeFi is really very fascinating as one can explore the different lending protocols, which opens better opportunities to earn interest.

Stablecoins

The stablecoins are also one of the best launches offered by the DeFi in which the stablecoins are pegged into the fiat currencies. Stablecoins has the potential of reducing the volatility of the various digital currencies and raising the value of digital currencies, which are supported by the blockchain. There are a couple of different stable coins available on the internet which maintain their values in a completely different manner.

After exploring the concept of DeFi, you would surely have noticed that it has gone through very desirable growth. But it is very typical if this type of finance will face any kind of challenges because there will be a rise in the number of fresh revolutions and growth which will be worthy.

By now, you might have got enough idea about the reason why people are so much obsessed with decentralized finance.

Decentralized finance article and permission to publish here provided by Jean Nichols. Originally written for Supply Chain Game Changer and published on December 24, 2021.
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