What is decentralized finance? An expert on bitcoins and blockchains explains the risks and rewards of DeFi
Curated from: theconversation.com
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Blockchain Will Save The World
Popular cryptocurrencies like Bitcoin have caught the imagination of the world, even as they remain highly volatile.
Many think of these emerging technologies like crypto coins and Blockchain as the ultimate solution to end the corporatization of the internet, along with being the means to end government intervention on liberty, currency and privacy.
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Decentralized Finance
Today, any kind of financial service, like an insurance claim, loan, asset management, or even stock trading requires the go-ahead from banking institutions and other middlemen who can seize your assets if you default even slightly.
Decentralized Finance(DeFi) cuts the middleman and puts everyone on the same platform, with no need for any bank loan officer if one needs to borrow some money.
To run this transparent and secure Blockchain system, there are Stablecoins, cryptocurrency tokens tied to Gold or US Dollars to help avoid volatility.
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The New World Order
Blockchain transactions are flexible, transparent, automated and highly efficient. They make no distinction between wealthy people and normal, ordinary customers, and run on open-source software.
This explains the crypto market value of 69 billion USD as of August 2021, all in less than two years. As the total global financial sector hovers around USD 20 trillion, there is a lot of room for crypto growth.
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The Risks Of DeFi
While Decentralized Finance is hot, there are next-level risks due to the highly volatile and instant nature of the digital world. Example: There is no banker or auditor to reverse transactions made in error.
Financial regulators and other entities are moving fast to contain the ‘damage’ on their existing infrastructure with new laws that may be overreaching and controversial.
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