While theorists argue about the capabilities of the blockchain tech, builders are busy creating. During the past couple of years, we’ve witnessed a rising wave of ambitious projects that have joined forces to fight the centralized financial system and transform the traditional banking economy. The alliance of these projects is now officially called DeFi.
DeFi, short for decentralized finance, can be described as an infrastructure of blockchain-powered decentralized tools such as digital assets, protocols, and dApps that mainly run on the Ethereum network. Most of them are open source and aim to provide solutions for the convenient management of your digital funds.Why Do We Need Decentralized Finance?
The fiat currency system is far from ideal – cash payments are inconvenient, so we all prefer to use our credit and debit cards. The problem with cards or other instant payment systems is that there is an almighty third party, whether it’s a bank or the government, that takes control over your money. Apart from charging various commission fees, banks may freeze your accounts for multiple reasons, not to mention financial crises, inflation, human factors, and privacy issues.
Besides, there is a huge percentage of people residing in developing countries who still remain unbanked and have no access to credits, loans, and other privileges.
Our financial system is also far from being fair and transparent and it’s clear that the world needs an alternative solution. That being said, decentralized finance might be the answer.
With Bitcoin and other cryptocurrencies coming into play, the situation with our financial system has potentially improved, but it has not changed completely. Although we’ve got a way to issue, store, and transfer money to one another on our own, the only safe way to get access to cryptocurrency is via centralized exchanges.
On top of that, the majority of crypto projects that help us manage our finances ...