Digital assets have gained a lot of popularity in recent times. This has brought about the development of numerous digital currencies such as cryptocurrency and decentralised finance. What is Decentralized finance (DeFi)?
Decentralised finance (DeFi) is an emerging financial technology that is similar to cryptocurrencies due to the secure distributed ledgers. This financial technology removes the control banks have on money, financial products and services.
The following features are what attract consumers to DeFi;
- DeFi offers their financial services and products for free hence it eliminates the charges that customers have to pay in the bank to receive similar services.
- They have fast transactions which only take a few minutes and seconds.
- You only need to have access to the internet to use it.
- It provides a safe storage space for your money.
DeFi is definitely a step forward in the financial sector as it removes the need of having intermediaries when you need financial services.
The following are some of the advantages of using decentralised finance;
Transparency.
Blockchain technology has gained popularity among traders and other cryptocurrency users due to its high level of transparency.
Decentralised finance is also considered to be transparent in its activities. From its name decentralised it is clear that its users will experience transparency since everything is conducted with the permission of the users.
Due to the high level of transparency, users are able to get warnings about financial scams while also getting informed about good investment deals that may be going on.
Decentralised Finance shows the user how certain activities were conducted.
Lending and borrowing applications.
Decentralised finance has become a major player in the lending and borrowing industry. It has fostered the development of peer-to-peer lending and borrowing solutions.
These solutions offer promising benefits to the end-user.
Smart contracts are a common thing in any digital currency. Decentralised finance provides assurance of smart contract integration. This eliminates the need of intermediaries such as banks which bring about the verification of parties.
Moreover, decentralised finance works for the verification process of lending and borrowing applications.
Saving applications.
Saving applications is one of the major benefits of decentralised finance. One of the ways is by leveraging DeFi.
In addition to that, users could also earn interest by locking their assets in lending protocols.
Security.
In decentralised finance, there is no central authority. Therefore, this means that users oversee their own assets and decide on what will happen to them.
However, it is essential for you to remember that just like any other technology, DeFi can be risky. The risks involved in it are less than those in the traditional financial institutions.
Accessibility.
Another great aspect of decentralised finance is the fact that one can easily access their assets from anywhere provided they have an internet connection.
Traditional institutions usually require a person to appear physically when opening bank accounts. When it comes to decentralised finance you just need to have internet connection and you will be good to go.
Interoperability.
Blockchain technology is constantly having improvements among them being interoperability. Interoperability is the ability of two blockchain systems to interact with each other.
Decentralised finance is already doing while still waiting for improvements to be made on the feature.