DeFi which stands for decentralized finance, has slowly started trending in the banking industry as the new phenomenon to revolution the industry. It is a system of tools and applications that were built based on decentralization using blockchain, smart contracts, and applications. It’s not such a distant thought to note the following points that indicate that DeFi is indeed better than traditional banking.

image made on canva

First, it should be noted is the fact that one of the main requirements of DeFi is the absence of intermediaries. In the conventional financial models, transfers are conducted through discrete financial establishments, as for instance, banks, and often they are expensive, slow, and not quite available. DeFi is decentralized and allows for P2P transactions to be conducted directly, hence, it is faster and cheaper than the traditional system. It is as well decentralized that offer most of the users more privacy and security compared to storing their financial details in one central database that would easily be hacked.

Also, DeFi provides equal opportunities to all people involved in the financial business. In conventional banking, the applicants with low credit rating or restricted access to the financial services may be discriminated and locked out of the financial instruments. DeFi is not limited to the high net worth individuals because it operates through the internet and requires a digital wallet. It enables more people to access financial services as well as gain better chances in the financial markets that were earlier a no-go zone to people with disabilities.

The third major benefit associated with DeFi is its openness. In DeFi, blockchain technology enables all the financial transactions to be stored on a public ledger so that everything is transparent. This openness assists in the enhancement of credibility amongst the users, thus eliminating the chances of cheating. On the other hand, traditional banking involves transaction systems that are not transparent and customers can only depend on the statement of the bank as to the status of their monies.

In addition, there are more available financial products and services in DeFi that are not present in the traditional finance system. These are dApps for lending and borrowing, decentralized digital market places for buying and selling of cryptocurrencies and other related financial instruments, and algorithms trading. The staking and liquidity tools are highly useful and give more control and options to manage and earn passive income from investments.

All in all, DeFi is the shift of people’s paradigm in how they engage with the financial services. As a result of the disruption of centralization and the elimination of middlemen, DeFi is more effective, honest, and accessible than conventional banking. With time, DeFi is likely to develop into an innovation that will change how people regard the concept of finances and enable people to become their own bank.

What is Inleo?

Inleo is a Blockchain based social media platform for crypto and finance content creators. Our tokenized app allows users and creators to engage and share content on the blockchain while earning cryptocurrency rewards.

Posted Using InLeo Alpha