Online Revolution — DeFi (Decentralized Finance)
Decentralized Finance (or simply DeFi) refers to an ecosystem of financial applications that are built on top of blockchain networks.
The idea of DeFi
To avoid the arbitrariness of central banks and governments, a group of crypto enthusiasts created a system of decentralized finance in 2017 that offers a global alternative solution for every service you already use — savings, loans, trading, insurance, and more available through decentralized platforms and internet connection.
The range of services is not only wider than banking but also more flexible. Thus, for example, the repayment of a debt at a certain interest rate can be determined arbitrarily. You do not need the name and surname of the lender, but a computer, tablet, mobile phone, and a solid knowledge of English.
How does it work?
There is no third party in these agreements that certifies the deposit or the loan, but the confirmation of each agreement is on thousands of computers around the world and it is impossible to falsify it. It is also impossible to hide the details of the contract between the parties because it is available to anyone interested. The programs that run all these applications are called decentralized applications or dApps. Decentralized Finance, in its simple sense, is the merger of traditional banking services with decentralized technologies such as cryptocurrencies and Decentralized Applications (dApps). In a more technical sense, it refers to the amalgamation of all the decentralized products and services like digital assets, smart contracts, protocols, and applications.
What are smart plans?
DApps needs very little human intervention. Instead, these platforms integrate advanced smart contracts to simplify their business systems. Smart contracts are per-programmed protocols that are launched upon receipt of crypto-data at their address. Smart contracts are most important for performing a large number of different tasks, from customer approval to payment. There are more DeFi applications today than ever before. These applications already save business and time and money for customers. DeFi platforms have started to appear in almost every financial sector.
The potential uses
It is obvious that in contrast to the traditional, centralized financial system, a new decentralized financial system is developing, which by its expansion threatens to jeopardize the classical financial system. If we take into account the fact that the complete program code is open source, ie available to everyone, it becomes obvious that the new financial system is completely transparent.
DeFi enables the creation of monetary banking services, the provision of P2P as well as unified trading platforms as well as the development and use of more advanced financial instruments such as DEX (Decentralized Exchange), financial forecasting platforms, and more. As in the classic financial controls in DeFi dApps can be used for KYC, AML but also other digital money flow management services.