DeFi or decentralized finance is on the headlines all around the world. It promises to eliminate the complexities of centralized financial systems like banks. DeFi works without the need for any human intervention based on blockchain technology.
Additionally, DeFi uses smart contracts to carry on trade between two parties. Smart contracts are programming snippets that help record transactions on the blockchain.
Several experts view DeFi as the next big revolutionary thing in the finance market. Some of them also predict DeFi will replace the traditional financial system and lead us into a new future.
Let’s explore why DeFi can be a potential game-changer for finance.
No Waiting, Documentation, or Hassle
DeFi is decentralized. It does not need a human to manage the trading process. Therefore, DeFi doesn’t have the traditional barriers present in established financial systems like banking.
For example, people can automatically buy and sell crypto currencies based on smart contracts, and they can also borrow money from peers without the need to fill up a form.
Moreover, you don’t need a CIBIL score to borrow funds. Collateral of crypto coins works fine to help you get your credit.
Billionaire investor Mark Cuban also feels the same about DeFi and believes it is the future of finance.
A Wide Range of Products
DeFi offers an alternate way to access traditional products; the most simple is trading crypto coins to earn profits on your investments. However, that is not the only service DeFi provides.
You can also borrow and lend funds even if you don’t own cryptocurrencies. Additionally, users can swap one cryptocurrency for another and create a diverse portfolio.
Innovative financial products are also appearing in the market, like NFTs or non-fungible tokens. These tokens can help establish the ownership of digital works and have already created a market of $338 million.
Adelyn Zho, CMO of Chainlink Labs, believes DeFi will revolutionize the finance industry. She suggests existing Fintech companies incorporate DeFi in their offerings to survive the competition.
More Profits for Everyone
DeFi can provide an opportunity to the general public to participate in the financial market. The barriers to entry are really low, and anyone can start trading with just a few dollars.
Manish Kataria, the co-founder of Quadency, thinks people can earn more through DeFi. In traditional systems, intermediaries charge high fees and leave investors with a profit of 1% to 2% in the short term.
DeFi, however, eliminates the middleman and the resulting fees. As a result, investors may enjoy profits of up to 8% by trading in decentralized finance.
Therefore, DeFi can help more people to get more returns without complex processes.
DeFi has created a new interest in cryptocurrency and will drive Fintech forward. However, DeFi is still in its nascent stage and needs more time to grow into a mature ecosystem. Additionally, DeFi also involves risks similar to investing in traditional markets. Moreover, the prices of tokens can rise or fall frequently, creating more apprehensions. So, always do your research in order to invest in DeFi confidently.