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What is DeFi?

DeFi means – Decentralised Finance, let’s look at that.

The existing financial system’s trust layer is made up of institutions and banks. These trusted intermediates keep the financial system running with the help of law enforcement. We pay them money and agree to terms for how we utilise their services in exchange.

There’s no need to rely on a middleman with decentralised finance (DeFi). DeFi refers to a group of crypto initiatives that control their platforms using a combination of encryption, smart contracts, and blockchain technology rather than relying on a central authority.

At present (March 2022) The total value locked is US$79.96 Billion.

We are still in the early stages of DeFi, as evidenced by the rapid creation of basic technologies such as DeFi lending platforms, DEXs, and payment systems.

What are the advantages?

Despite the industry’s phenomenal growth, it is safe to say that it is still a smidgeon in comparison to the traditional financial landscape. There is still a lot of space for DeFi lending to expand.

Lending & Borrowing power

Access

Permissionless

Transparency

1
Transparency

DeFi gives the financial system a new level of openness and control. These protocols have open-source code that can be audited by anyone to see how funds are allocated. DeFi's transparency is a huge advantage over traditional finance, where users are typically simply given a hazy picture of how their money is being spent.

2
Access

DeFi protocols can be used by anyone with internet connection because they are digital. Furthermore, smart contracts' huge cost savings enable serving low-income users a profitable service. In conclusion, DeFi promotes accessibility by serving consumers who are unable to access traditional finance due to geographic or socioeconomic constraints.

3
Permissionless

Being Permissionless is the primary reason why DeFi platforms are being scrutinised by regulators. Because DeFi systems are decentralised, users do not need to upload their identification documents, obtain special permits, or pass through the many hoops that TradFi requires. Anyone, on the other hand, can use any service, including DeFi lending platforms, debt finance, insurance, and so on.

4
Lending & Borrowing Power

Lending and borrowing are two of the most prominent use cases in DeFi. Anyone can lend their bitcoin and earn interest using something termed a 'decentralised lending system.' Borrowers must pay interest on the amount they borrow from the protocol, therefore this interest originates from them.

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