DeFi or Decentralized Finance is a system that aims to provide new financial services that are more open, transparent, and do not require third parties as intermediaries in making transactions.
This can be done by DeFi because DeFi is designed using protocols, crypto assets, smart contracts, and dApps or Decentralized Applications built on a blockchain network. DeFi can be a global alternative to any financial service in use today. For example, for savings, loans, trading, insurance, and others that can be accessed by anyone in the world using only a smartphone and an internet connection.
What are the benefits of DeFi?
DeFi applications do not need an intermediary to make transactions, like traditional banks. Although it can be accessed openly, users still have full control over their assets at all times with the presence of dApps. The presence of DeFi can also reduce costs associated with providing and using the product as well as enabling a more independent financial system.
Since the DeFi system is built on blockchain technology, the potential for data being hacked or lost due to using a centralized system can be solved. This is because the data will be recorded on the blockchain network and spread over thousands of nodes, so the potential for service closures due to system downtime or data being hacked is almost impossible.
Examples of uses and advantages of using DeFi?
The uses and advantages of using DeFi are as follows:
Borrow and Lend
Decentralized lending and loan application protocols are one of the most popular types of applications that are part of the DeFi ecosystem, compared to traditional credit systems which take a long time to process.
In the DeFi ecosystem, transaction settlements occur instantly, have the ability to guarantee crypto assets, and without credit checking when a user wants to borrow one of the available tokens. Therefore, this new revolution in the financial system can potentially become a standardization of financial models in the future.
In addition, because this lending service is built on a public blockchain, transactions are transparent and have security guarantees using cryptographic verification methods. Well, this Decentralized Finance technology makes borrowing and lending activities easier, cheaper, accessible quickly, and available to more people.
There are quite a number of Decentralized Finance projects currently in the blockchain world such as Compound, Maker, Aave, Yearn Finance, Chainlink, 0x, Uniswap and DAI that are also competing in the DeFi ecosystem. Indodax trades quite a lot of Defi tokens mentioned earlier for those who are interested can also buy or sell them through Indodax. Oh yes, not only that, recently, Indodax also helped develop a DeFi project called Tadpole Finance, you know! For those of you who don’t know about Tadpole Finance, please check the link above!
Decentralized Finance technology does not require intermediaries like traditional banks, so transactions can be done quickly. You also no longer need to register with an identity card like at a bank as usual. Instead, you can simply link your personal wallet with DeFi platforms, so you can have full control over your assets and monitor them for changes. Another interesting thing, you can also immediately see which crypto assets can generate high returns on a platform so that you can maximize your profits even more!
Service That Never Closes
In Decentralized Finance, this is not possible because the financial services in Decentralized Finance are built on a blockchain network so that recorded data will be spread over millions of nodes which makes potential services inaccessible or inoperable because there are no online nodes in the network. almost impossible. This is clearly different from the traditional financial system where services are closed due to holidays or certain days when all employees are off.
Ease of Access
Users can access DeFi anywhere and anytime as long as they have an internet connection and a smartphone or other device to access Decentralized Finance. This is certainly different if we want to make a loan to a bank where we have to come directly to the bank and cannot be done via a smartphone.
dApps also allow users to create stablecoins, lend money, and earn interest on crypto assets they own!
Wow, interesting huh? Surely now you are more curious, what are examples of DeFi use cases?
One of the emerging concepts in the use of DeFi is Yield Farming in the DeFi ecosystem. Yield Farming is liquidity mining or liquidity mining to generate rewards or prizes in the form of crypto assets. In simple terms, Yield Farming is the latest way to generate crypto assets using the crypto assets you already have.
Yield Farming usually uses an automated market maker (AMM) and involves Liquidity Pools (LP). Well, Liquidity Pools are basically smart contracts that contain crypto assets, where Liquidity Pools act as a place when users borrow crypto assets or lend them to other users, or simply exchange these assets into ERC-20 tokens.
If so, what are the DeFi indicators that can measure the overall health of Yield Farming? The answer is Total Value Locked (TVL)! Total Value Locked (TVL) measures how much crypto is locked in DeFi lending and other types of money markets. On some platforms, TVL means the amount of funds deposited by the liquidity provider to the protocol.
A good place to track TVL is via DeFi Pulse. There, you can check which platform has the highest amount of ETH or other crypto assets locked in DeFi. That way, it can give you an overview of the current state of Yield Farming results.
The more values ??that are locked, the more farming results you will get. It should be noted that you can measure TVL in ETH, USD or even BTC. Each will give you a different picture of the state of the DeFi market.