DeFi or decentralized finance is defined as finance that is not centralized. In simple terms, DeFi is a system where crypto asset owners can borrow money by pledging their crypto assets, such as Ethereum.
DeFi is a system or derivative product of the blockchain. DeFi is an application that uses smart contracts or smart contracts. Smart contracts are the most powerful feature of the blockchain. Smart contracts are a special programming language on the blockchain. Programmers can leverage the code to create applications that run entirely on a decentralized blockchain system.
Based on data from DefiPulse, in August 2020, the cumulative valuation of crypto assets stored in the DeFi sector reached US$1.85 billion distributed across 30 Defi applications, from Compound to Connext. All of them are competing for a large number of users with a guaranteed crypto asset that is increasing.
The top three DeFi, Compound (US$629.8 million), Maker (US$557.9 million), and Synthetic (US$319 million), continue to compete. Several other cryptocurrencies, such as YFI’s yEarn Finance, also compete on the system.
Below, we will discuss the properties of DeFi. There are several characteristics or advantages to applying for credit or borrowing money.
Here are the details:
- Integration between lending and borrowing processes
- Crypto assets can be used as collateral
- Instant and safe settlement
- There is no requirement to conduct a survey. This indicates greater access for many people who cannot borrow money conventionally, like at a bank.
- Standardization and interoperability can lower costs with automation.
- Benefits and Advantages.
All technologies are created to eradicate poverty and improve human well-being. Likewise, blockchain systems and crypto assets were created. DeFi is no exception. DeFi was created to make it easier to access loans for people or people who find it difficult to get loans from banks.
One of its most significant advantages is that DeFi doesn’t look at the region and doesn’t look at the person. Usually, the lender, say a bank, is subjective in lending money or financing. Banks or financial institutions look at a person’s ability to pay, where he lives, what he does, etc.
In addition, financial institutions are generally limited by distance or region. It is difficult or almost impossible for people in rural or remote areas to get loans. In addition, they are also tricky with administrative processes such as not having an ID card.
Because crypto assets are already guaranteed, the guarantor platform or lender does not need to worry about who is borrowing, where he borrows, the risk of not paying, and so on.
This system also generalizes all circles, regardless of whether he is a reliable trader or a farmer in any country. Lenders do not need to look subjectively, do not need to do surveys, and waste time.
However, this technology is only loved in developed countries. Even so, this technology and system is a future monetary system that will continue to develop. Later, people in developing countries like Africa or Indonesia will no longer be strangers to borrowing money by mortgaging crypto assets.
Just imagine a mother farmer in Maluku can get a loan from the United States by pledging crypto assets.
How fascinating is the world of crypto and blockchain assets developing and loved in 2020? DeFi is also a future monetary payment system that will continue to evolve.
Understanding it is a fundamental technique for those learning to trade bitcoin and other crypto assets. What’s more, the latest technology and systems for crypto assets and blockchain? It looks like it will continue to grow.