Decentralized finance (DeFi) is altering how people think and handle financial transactions. Simply put — we are entering into a new era where people wield direct control over their finances with little or no limitations from centralized authorities. It is a seismic shift of power from banks and governments and giving it to people. The emergence of the COVID-19 epidemic that made governments lock their boundaries and close businesses accelerated the adoption of DeFi, and now it is emerging to be one of the best options.
This post digs deeper into DeFi to answer the big question, “Is DeFi the future of banking financial services?”
What is Decentralized Finance?
This is a blockchain-based type of finance that does not use financial intermediaries, such as exchanges, brokerages, and traditional banks. Instead, the services are offered on decentralized blockchain networks, especially Ethereum. The platform brings together the lenders, sellers, and borrowers so that they can work on a peer-to-peer basis.
Decentralized finance is anchored on the need to remove barriers and complexities of conventional banking. This means that they are open to all people, including those who would have qualified for bank accounts. For example, if you cannot get a bank loan because of a poor credit score or a bankruptcy case, DeFi will be there for you.
Why DeFi is the Future of Modern Finance
One of the reasons why DeFi is considered the future of modern finance is that it is reliable. At first, many parties, especially central banks and governments, took crypto coins with suspicion. However, that is now changing, and more authorities are starting to back the new technologies. Recently, El Salvador and Nigeria indicated their support for cryptocurrencies. Most banks are also considering blockchain systems suitable for their enterprises. The chances are that the entire globe will ultimately go crypto.
● People Value Privacy and Decentralized Finance Guarantees It
In finances, no one wants his/her details to get exposed to third parties. This privacy is not guaranteed when using conventional banking services. A long list of parties, from cashiers to top managers, can pull out the details. The best way to operate in total anonymity is working with DeFi because there are no third parties. Even the nodes that confirm transactions can only check account balances for confirmation and will never know the owners or their personal details.
● It is Cheaper and Reliable
One of the primary pain points that made people look for alternatives to the traditional banking system is the high cost of transactions, such as sending money abroad. For example, it is very expensive to send money abroad using a bank transfer. Again, the process comes with many limitations, such as the total amount you can send and taking too long. Well, you can sweep these challenges aside because DeFi is better and more reliable.
When sending funds abroad using blockchain and cryptocurrencies, it only takes seconds or a few minutes. Again, there are no limitations. As long as you have enough funds to send, you can transfer them any time of the day or night. You can even send funds at night and during public holidays.
● It Helps People Hold their Assets Without Risking Seizure by State
For most people, DeFi is the perfect escape “island” because it helps them hold their assets without worrying about state seizure. If your funds are in a bank, it only takes one court order to freeze the funds. Note that this can happen even on minor grounds. For example, a workplace, accident, or social media-related issue can drag you into court, resulting in the freezing of your account.
DeFi is the future for many because no one, including courts or governments, can have jurisdiction over your assets after buying crypto coins. Even when you stake them in a pool or exchange on different platforms, you are always sure of having your coins. The only person who can take over your coins is the one with your private keys. So, try to keep the private keys safe and away from all third parties.
This post has demonstrated that DeFi is the emerging reality in our financial services. It has proved to have ample solutions to most issues affecting the current banking systems. With more parties approving DeFi-related services, such as crypto staking and lending, this might be an excellent moment for you also to join. Visit hi.com to learn more and optimize their benefits.