DeFi (Decentralized Finance, decentralized finance) aims to allow anyone in the world to conduct financial activities anytime, anywhere.
Since 2019, DeFi has become a long-term hot topic in the blockchain industry. To this day, the development of DeFi still affects the financial market and the blockchain ecosystem.
Just as it is difficult for many people to understand blockchain technology, DeFi also has cognitive barriers. So, how do we understand “decentralized finance” systematically? What kind of value is it that makes DeFi so influential and popular?
DeFi agreement will implement decentralization to the end
In August 2018, when Brendan Forster, co-founder and CEO of Dharma Labs, proposed the DeFi concept, he believed that decentralized finance would become the mainstream in the future.
Today’s financial system is mainly controlled and regulated by a central system. DeFi hopes to establish a transparent, accessible and inclusive peer-to-peer financial system through a distributed open source agreement, so as to reduce trust risks as much as possible and allow participants Get financing easily and conveniently. DeFi’s vision is that all assets can be tokenized and freely traded in the global open market.
The main reason why DeFi projects can become popular in a short period of time is that people no longer have to rely on decentralized banks or specific trust to interact with another party. Users can trade 7*24 hours, and settlement is relatively quick. On the other hand, traditional financial settlements, especially cross-border transfers, have very cumbersome steps and high handling fees, and it takes many working days to arrive. And DeFi can bypass the intermediate carrier that obtains a large amount of profit, and complete the payment from A to B at a faster speed and lower handling fee.
Now, DeFi’s decentralized finance is used in payment, lending, stablecoins, decentralized exchanges, and pledge mining.
Compared with traditional finance, what are the advantages of decentralized finance?
1. The operation is simple and easy to understand: Compared with traditional finance, the operation of decentralized trading is easier.
2. Cross-border payment: DeFi is global, no matter where you are in the world, you can engage in financial activities.
3. Higher privacy and security: Based on the anonymity of the blockchain, DeFi also has higher privacy. It is also safer.
4. Broader global financial services: Everyone can conduct decentralized transactions through the Internet, and decentralization allows everyone to enjoy the same financial services.
5. Anti-censorship transactions: Decentralized transactions cannot be closed by centralized institutions, and transactions are guaranteed to be unchangeable.
In addition, DeFi decentralized exchanges (DEX) are also challenging traditional centralized exchanges (CEX). Recently, the leading DEX, Uniswap’s 24-hour trading volume history surpassed the mainstream centralized exchange Coinbase for the first time. Although Coinbase is not the world’s number one centralized exchange, the position of centralized exchanges in digital asset finance has undoubtedly been shaken.
summary
Of course, DeFi’s fire is not only due to the characteristics of its application scenarios and protocols. The increase in value must be the result of time, location, and people.
Due to limited space, the remaining content will be updated in the next article. Welcome to follow us for more interesting and hard-core blockchain articles!
