DeFi (Decentralized Finance) | Emerging Alternative to Centralized Finance

Posted by MuBlockchain on December 1st, 2020

Decentralized Finance (DeFi)

Decentralized finance, which we also refer to as DeFi, associates with the transition of financial frameworks. Blockchain’s distributed technology provides frameworks for the shift from existing centralized systems to peer-to-peer ecosystems. The DeFi infrastructure has enabled opportunities with an expansive ecosystem comprising integrated protocols and financial instruments. They range from lending and borrowing platforms to stablecoins, tokenized crypto-tokens, and decentralized crypto exchange platform development.

Recently, DeFI (decentralized finance) has proved to be a success in the blockchain and crypto fintech development space. One proof of that is its range of real-world use cases for individuals, entrepreneurs, and businesses with more than billion worth of value stored in smart contracts.


Traditional Vs Decentralized Finance

Although our conventional financial system works on a centralized platform controlled by central authorities, agencies, and intermediaries, decentralized finance operates as per a code running on a decentralized infrastructure powered by blockchain technology. It enables developers to develop custom efficient and secure financial protocols and platforms for the masses. They are open to anyone with an internet connection by installing immutable smart contracts solutions, majorly developed with Ethereum blockchain.

One of the key DeFi developments is that it has emerged as a replacement of fiat or real-world assets. Now, it enables crypto-assets to come into use in ways not imaginable. The entirely new technologies that can only operate on blockchains are decentralized exchanges, synthetic currencies, and flash loans. Concerning risk, confidence, and opportunity, this paradigm change in financial architecture offers a range of benefits.

Decentralized Finance (DeFI)

What Are the Benefits of Decentralized Finance?

Protocols and platforms in decentralized finance employ the most significant aspects of blockchain technology. It ensures financial stability with accountability, liquidity, and an interconnected and standardized economic structure.

Customizable Financial Asset Development

Highly customizable and programmable smart contract solutions can automate deployment and enable the development of new financial instruments and digital assets.

Data Immutability

Blockchain provides tamper-proof coordination of data through the open architecture. It enables privacy and auditability with transparency.

Transparency across the Network

Each transaction distribution and verification happens by users on the network on a public blockchain network. DeFi protocols running on a blockchain network carry open-source code available with restrictions for accessing, auditing, and expanding on for all.

Open for All

DeFi has the characteristics of providing cost-effective, permissionless access to services, contrary to conventional finance. Anybody can get access to DeFi applications with a cryptocurrency wallet and the internet. It enables access regardless of geographies and without requiring a significant amount of funds.

Ownership of Funds

Participants in a DeFi market have control over their funds while safeguarding their information across permissionless financial applications and protocols with Web3 wallets like MetaMask.

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Joined: October 27th, 2020
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