What is Decentralized Finance ( DeFi )

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What is Decentralized Finance ( DeFi )
blockchainexpert.uk
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• INTRODUCTION

Defi is also is known as decentralized finance
which leverages existing blockchain technology
into a decentralized micropayment platform
without any intermediaries. Defi is one of the
technological concepts which got huge
requirements from the banking sector as well as
from those who deal with a large number of the
financial transaction. Cryptocurrency transaction
is accepted in most of the countries around the
world as it facilitates with an easy and fast
transfer of money within seconds with an
assurance of no middlemen. The DeFi is also known
as open finance which is powered by
blockchain. The main problem with the current
banking transactions is, it takes time to send
money globally and also it charges with a
customer service fee for every single
transaction, which isnt acceptable for all
customers. Though the transaction fee for a big
amount is acceptable, it isnt that feasible for
those who transfer small amounts. The current
banking system also puts a bar on the minimum
amount a customer can transfer which makes the
current banking system all more narrowed.
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• The most promising feature provided by blockchain
  for DeFi is a smart contract system. The system
  acts as a virtual medium between the two
  customers directly. One can send any large or
  small amount to another customer by calling a
  transfer function of this smart contract feature.
  This enables the user to send the money globally
  within seconds and no third person is watching
  that move, instead of that a bunch of
  pseudo-codes is executing that transfer for every
  customer.
• The best example where DeFi is trustworthy and
  more efficient is the whale transaction in
  bitcoin that occurred in 2019, where someone
  transferred bitcoin of worth 1 billion in
  seconds.

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From the above images, we can see that about
94505.13 bitcoin of worth 1 billion has been
transferred and nobody know who did it and, the
anonymous person didnt have to pay a single
penny from his pocket as transaction fee. The
above transaction is known as whale transaction
in a blockchain platform. The decentralized
finance system will power up the existing finance
system which is owned by a central authority,
also make it automated assuring zero error and no
unwanted service fees. The defi has been hot
favourite adoption for banking industry where
bankers need not to worry about the transaction
entry on their private ledger. Moreover, defi is
amplified by the smart contract facility which
enables each bank to make their own
cryptocurrency and track each and every
transaction done by their customers.
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ADVANTAGES OF DEFI Traditional financial
institutions like bank act as an intermediator
between the two end customers by charging a fee
from both sides in every single transaction. The
DeFi doesnt need any middlemen at all as it
controls the entire dispute that occurred in the
application through a smart contract. As the
deployment of DeFi is on the top of the
blockchain, there is no chance that a single
point of failure occurs. Moreover, the data is
recorded without any error. Open leading
protocols are one of the most favorite use cases
of DeFi. Over the traditional lending and
borrowing method, it can settle down instant
transactions, digital asset collateralization,
elimination of credit checks. MONETARY
BANKING With the help of DeFi, monetary banking
can be regulated in more efficient manners like
issuance of stable-coins, mortgages, and
insurance Through the issue of the stable coin,
the bank can peg that stable coin value with
real-world asset and make transactions faster and
convenient way Ex issuance of stablecoins,
mortgages, and insurance
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DECENTRALIZED MARKETPLACE Some of the most
demanding application of Defi is decentralized
exchanges, which customers can sell and buy
cryptocurrency with any interference of
intermediaries. Since it requires less wok force
the fee is comparatively very less than
centralized exchanges. CHALLENGES OF DEFI The
performance limitations, the major factor which
is slowing down Defi, compared to the traditional
payment system, DeFi requires some time to
complete its action. Moreover, the challenges are
not only constrained with performance issues, but
the crypto regulations adopted by various
governments are also putting this promising
technology into a sleep mode. Therefore, the main
problem arises while adopting this technology as
a universal solution.
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Decentralized Finance ( DeFi )
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