DEFI

what's the defi

DeFi, a.k.a decentralized finance, is the application of the principles of finance found in traditional finance (interest-bearing accounts, currency exchanges, market making, synthetic/derivative financial instruments, etc.). DeFi has experienced an exciting boom and transitioned from being an interesting experiment on the Ethereum blockchain to a solid and proven financial model continuing to gather interest among all sets of user classes whether retail investors, hedge funds, family offices, and the elusive ”whale” class. The DeFi landscape of today is at the base of a new peak, gaining solid traction and growing into a sector that shall ultimately become the foundation of a decentralized economy that provides balanced, secure opportunities for the masses, banked and unbanked, regardless of nationality.

Among countless real-world use cases and possibilities that DeFi presents to its participants, one fundamental opportunity seems to stand out the most – yield farming, a new embarkment of liquidity providers. DeFi presents an opportunity for every person on Earth to have access to safe, stable incomes to protect and improve the lives of themselves and their families.

Payment & Clearing System (Remittance)

When we use traditional bank payment services, we can usually deeply feel the pain points-remittances involving banks all over the world usually take several working days to complete and involve a wide range of handling fees. Even more troublesome is that there may also be issues related to the supporting documents required for remittances, compliance with anti-money laundering laws, and privacy.

In DeFi activities, cryptocurrency allows to bypass the middleman who can make considerable profits in the transfer process. The transfer speed is faster, the transfer transaction will be processed unconditionally, and you only need to pay a lower fee than the bank. For example, it only takes 15 seconds to 5 minutes to transfer cryptocurrency to any account in the world and pay a small fee.

Availability According to estimates by the World Bank, as of 2017, there were 1.7 billion people who did not hold accounts with financial institutions, and more than half of them were from developing countries. They mainly come from poor families. The main reasons why they do not have a bank account include poverty, geographic location and trust issues. For the 1.7 billion people without bank accounts, access to banking services is very difficult-but DeFi has the potential to make it easy. Access to DeFi Dapp (decentralized application) only requires the user to have a mobile phone connected to the Internet, and does not need to go through a lengthy verification process. The World Bank estimates that two-thirds of the 1.7 billion unbanked people own a mobile phone. Therefore, unlike traditional banks, DeFi Dapp can become a gateway for these people to obtain financial products.

Centralization & transparency Banks are one of the central nodes leading to the collapse of the financial system-the collapse of Lehman Brothers triggered the 2008 financial crisis. It is very dangerous to concentrate power and funds in the hands of banks. Ordinary investors cannot fully understand the operation of financial institutions, which led to a series of events in the 2008 financial crisis, including credit rating agencies that gave high-risk mortgage securities a AAA rating.

In contrast to DeFi, most of the DeFi protocols built on public blockchains (such as Ethereum) are open source, facilitating auditing and enhancing transparency. These agreements usually have a decentralized governance organization to ensure that everyone knows exactly what happened, and to ensure that no evildoer can make malicious decisions alone. The DeFi protocol will be written as a line of code, which runs exactly in the way it was written. You can't cheat the code because it treats every participant equally and does not treat it differently. Since the code will be open source for public review, any vulnerabilities will be quickly revealed.