Technology has greatly improved financial services. It facilitates most transactions in banks. Despite this benefit, you have to go via intermediaries such as financial institutions to complete financial transactions. Defi, decentralized finance, utilizes technology to remove the middlemen.
Through Defi, blockchain software offers financial services to people worldwide. It makes peer-to-peer interaction between transacting parties possible. Instead of the middlemen, a software-based intermediary facilitates financial transactions.
Rather than completing financial transactions through middlemen, you can use the Defi system. You do not need proof of identification. Besides, users of Defi have individual wallets that give them control over their funds. Also, the trading system available on the Defi system serves individual users rather than financial institutions.
Most of its apps as well as services are created on public blockchains like cryptocurrencies. They provide Defi-customized innovative services. They can also replicate existing services created using common technology.
Is Defi profitable?
Through the Defi system, crypto trading and other financial transactions are faster with full transparency. There are no paperwork or minimum transaction amounts. You can easily invest in defi crypto trading. Besides, Defi has given rise to other investment tools like yield farming. You will earn the best interest rates when you invest in Defi through yield farming.
It is similar to the liquidity pool on decentralized exchanges. The users deposit an equal amount of two cryptocurrencies. They provide an adequate supply of crypto assets when traders need to exchange one for the other. The depositors share the profit from the exchange. However, yield farming gives higher returns than the liquidity pool.
Why Defi system is important
The Defi system is growing rapidly. Some benefits that contributed to its growth.
Cross-border payments at reasonable rates
A lot of intermediaries are involved in money transfers from one country to another. Usually, such transactions are conducted at expensive rates. Decentralized finance can remove the middlemen and make remittance services more affordable.
Access to financial services
Millions of adults across the globe remain unbanked. Without an account via a mobile money provider or at a financial institution, they lack access to financial services. Fortunately, Defi offers anyone with an internet connection access to financial services.
People can easily use decentralized financial services through apps. Defi can make it possible for an individual to receive funds from a foreign country. Then, the person can invest the money in another country.
Improve security and privacy
Defi system allows users to have custody of their money. They can conduct transactions without the central party’s validation. Also, users can access financial data through a transparent public blockchain.
Absence of a central party
Anyone with internet access can use the Defi system. No central bank or government can reverse or halt the financial transactions conducted on a decentralized network. None can invalidate completed transactions at a later date. Besides, the blockchains for decentralized financial services can’t be turned off.
The decentralized financial system can help people to protect their wealth. With Defi, you can execute direct purchases, get insurance, loans, crowdfund, and perform other transactions without delay.