Can decentralized finance revolutionize the financial segment?

Decentralized finance, acronym DeFi, became wildly popular in the summer of 2020 as the exciting phase of Bitcoin and other cryptocurrencies overshadowed the essence of how decentralized finance can revolutionize.

Undeniably, decentralized finance is not new, but the application of decentralized finance in finance was discovered very late.

The decentralized infrastructure is based entirely on cryptocurrency technology. The very first cryptocurrency, Bitcoin, launched the concept of decentralized finance in the first place. Bitcoin was created by a Japanese inventor named Satoshi Nakamoto. Just like Bitcoin, decentralized finance on blockchain technology and peer-to-peer networks is complex.

In the decentralized finance industry, there are several models that can potentially transform the finance segment. However, the question is whether or not decentralized finance will impact the financial segment.

Below is everything you should know about decentralized finance and how it can transform finance. So, without further ado, let’s take a look at how decentralized finance is understood as a concept.

Underline DeFi!

The financial segment is known for adopting the new technology from the start. You may be familiar with the fact that once you start using the technology, you are allowed to transfer money from one bank account to another.

Decentralized finance makes appropriate use of the new technology, but the dynamics of decentralized finance are very different from the traditional banking system. Decentralized finance as a cryptocurrency is accordingly free from third parties and intermediaries.

Federal banks and financial authorities of each region control each nation’s financial segment, but these federal banks cannot regulate these financial segments. In summary, there are nominal limitations on decentralized finance and these systems do not follow the rules set by government agencies.

Since it has already been established that decentralized finance on blockchain technology is complex, blockchain technology is based on distributed ledger technology. The distributed ledger technology shows that the public database cannot be stored in a single vault and this distributed ledger is stored on the computer system known as the node.

In addition to transparency, blockchain should also increase the security of a system, since anyone can access the blockchain.

Blockchain technology is linked to the peer-to-peer network. The peer-to-peer network is an essential part of the decentralized network as it supports the decentralized financial administration in maintaining political independence.

Several layers exist in decentralized finance, such as: B. the accounting level, the valuation level and some other levels that make it robust in contrast to the traditional financial system. The decentralized finance component includes a peer-to-peer network, a blockchain, and several other technical protocols.

Can decentralized finance revolutionize finance?

Undeniably, decentralized finance is a hugely potential industry, but the application of decentralized finance alongside its proliferation in the marketplace is much less at odds with the traditional financial system. All the more reason why decentralized finance is currently in the evolution phase as there are several bumps in decentralized finance.

Recently, the biggest heist in decentralized finance occurred when a hacker stole more than $600 million from a decentralized finance network called Poly Network. The Poly network allows you to migrate cryptocurrency from one blockchain to another public ledger.

The hack accordingly demonstrates the political independence of this digitized system as a disadvantage. A balanced approach towards decentralized finance with full certainty can obviously transform the financial space.

It is quite obvious that decentralized finance cannot transform the finance segment as most people trust traditional finance and decentralized finance needs to be recognized by everyone.

The contract value of decentralized finance has capped the price of $40 billion, showing that decentralization is growing at a tremendous rate and, if harnessed properly, can potentially transform the financial segment.

peer-to-peer lending

Peer-to-peer lending is the broadest application of decentralized finance. Peer to peer lending has helped several people make money by lending to individuals and businesses. Peer to peer lending platforms are subject to a huge user base where individuals and businesses can request money from the user.

You can check the credit and personal details of the users you want to lend money to. Peer-to-peer lending accordingly offers significant interest in the form of crypto or fiat, depending on the peer-to-peer lending.

Some Applications of Decentralized Finance in Multiple Industries!

Decentralized finance is applicable in almost every industry and every industry is exposed to the application of decentralized finance in the instance.

Monetization of the gambling industry

Gambling industry is one of the gigantic industries with huge user base and online gambling industry is the extremely essential part of gambling industry. Blockchain gaming is the hottest topic in the online gaming industry and blockchain gaming is accordingly an application of decentralized finance as it is complex even in blockchain and peer-to-peer networks.

There are several blockchain games in the industry that can earn you a gigantic amount of money. You may be amazed by the fact that blockchain games offer you an earning potential of almost $1200 per month; all the more gamers from developing countries have quit their jobs to make so much money. The play-to-earn model underlying the decentralized technology leads to the monetization of the gambling industry.

The current state of decentralized finance

As mentioned above, decentralized finance is growing in the finance segment in an embraced phase. In contrast to the generalized financial segment, however, it is still insignificant. Decentralized introduced stablecoins because every institution that underlies decentralized finance offers stablecoins as their currency.

The basic concept of a stablecoin is similar to cryptocurrency, but these points are devoid of volatility. Most stablecoins are backed by fiat currency. The contract value of decentralized finance is increasing, but the system is still riddled with laws, and those claws need repairing for a more decentralized ecosystem.

In short, decentralized finance has great potential that is being properly exploited. It can revolutionize the financial segment.

Decentralized finance revolutionizes article and permission to publish here by Jean Nichols. Originally written for Supply Chain Game Changer and published on November 27th, 2021.

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