DeFi: The new age financial realm
DeFi ushered in a new era of alternative financial services, with the goal of creating a system that better serves a whole network of users. Decentralised Finance (DeFi) is a financial system developed on the Ethereum Network. It’s used to trade digital assets, create smart contracts, and develop decentralised apps (DApps), among other things.
Bitcoin is a form of money that is not controlled by any third parties, such as banks or governments, and maybe moved from anywhere to anyone without the use of a centralised financial institution, making it decentralised money. Likewise, Decentralized finance is a system that does not rely on intermediaries.
The financial system and its services are highly centralised, which means that you can always rely on a central authority, whether it’s a firm or a person. Mismanagement, fraud, and corruption, to name a few, are all problems associated with the Centralized Financial System, or CeFi. A decentralised financial system has been built to combat these threats. As a result, the introduction of DeFi replaces the existing financial system with smart contracts.
The question that now arises is whether DeFi is safe. How does DeFi affect the financial realms in a significant way? Let’s talk about the importance of DeFi.
DeFi allows any two parties to deal securely and directly without the need for a middleman or a central authority. As a result, many more consumers can obtain financial services at cheaper costs or with better interest rates than traditional financial institutions can provide. However, it’s critical to remember that investing is a risky endeavour in and of itself.
India is now rated second in a poll of countries that utilise cryptocurrencies the most, with over 9% of respondents claiming to have used cryptocurrency. India is positioning itself as a worldwide blockchain and international DeFi hotspot at a rapid pace. Nimbus has seen this growing tendency and capitalised on it by establishing systems across India.
Using a DeFi platform instead of traditional financial institutions can provide various benefits, regardless of what you’re trying to achieve. The primary reasons why individuals are using DeFi are as follows:
Feasible: Unlike traditional finance, DeFi is characterised by its open, permission-less access. While some people are unable to create bank accounts or obtain loans, a DeFi platform is accessible to anyone with an internet connection. Because of this high level of accessibility, DeFi transactions can take place anywhere in the world.
Cost-effective: The use of blockchain as a technological infrastructure enables relatively quick and low-cost transactions/settlements, as well as the immutability and automation of financial contracts. DeFi has helped people all around the world achieve financial independence. It provides investors with measures to protect their assets from capital regulations. Furthermore, DeFi eliminates KYC, making the transfer process faster, simpler, and more cost-effective.
Safe and Secure: Most DeFi programmes allow the user to keep control of the private keys. In the blockchain ecosystem, this is referred to as non-custodial. Without a trusted third party, the user has complete control over their funds.
Open-source network: Every transaction on the public Ethereum blockchain is broadcast to and confirmed by other users on the network. Ethereum and the DeFi protocols that operate on it are both created with open source code that anybody can see, audit, and improve. It’s an open-source network built into the DeFi platform that allows anyone to access it regardless of their financial situation.
The benefits of implementing decentralised financial systems are evident, as seen by the points outlined above.
Decentralized crypto exchanges, financial DApps, and blockchain development ecosystems are examples of DeFi ventures. Tokenomics is another name for these projects. DeFi systems use advanced technology to provide decentralised applications (DApps) and asset management functions. Decentralized apps (DApps) are similar to regular mobile apps, but they have one distinguishing feature: they run on a peer-to-peer blockchain decentralised network, implying that network control is not centralised.
Some of the most exciting DeFi projects to look out for are :
MakerDAO: Borrowing DAI, one of the most popular stable coins and earning interest, was one of the first decentralised finance (DeFi) projects. It is at the top of this DeFi project, with an estimated total value of 7.4 billion EUR locked into its platform as of May 25th, 2021. MakerDAO is a Decentralized Autonomous Organization that has gained a lot of attention thanks to its native token DAI.
AAVE: AAVE is one of the top 30 tokens in the cryptocurrency market. Flash loans are a quick and easy way to borrow money without putting up any security. Users receive “aTokens,” which are connected to the underlying asset they placed and let them earn interest, when they make a deposit on Aave. The native token has almost 13 million tokens in circulation out of a total quantity of 16 million AAVE coins.
Compound: Similar to AAVE, it is a sophisticated borrowing and lending technique that uses over-collateralization to secure loans. COMP, the native token, has returned over 222 % this year. There are around five million COMP tokens in circulation, with a total quantity of approximately 10 million COMP coins
Uniswap: Uniswap is a platform that allows users to exchange ETH and ERC20 tokens automatically. It is a decentralised exchange (DEX) that facilitates the trading of crypto assets through smart contracts and automated liquidity algorithms.
Synthetix: Through its derivatives issuance protocol, Synthetix (SNX) enables the development and trading of derivatives on a wide range of assets (stocks, currencies, and commodities).
Yearn. finance: In the last year, YFI has increased by more than 220 percent. It is an autonomous protocol that explores the DeFi space for the greatest yields and invests in them autonomously.
The DeFi platform has a lot to offer investors in terms of additional surprises that will help them make their investments worthwhile in the future. To perform secure online transactions fast, users around the world have begun to embrace the digital transition. DeFi is a challenging platform to compete with in the business because it succeeds in the long run, bringing many new entrepreneurs and investors into the fold.