Steemit Crypto Academy Contest / S4W2 - Decentralized Finance by starrchris
Good evening lovely steemians how are you all doing, hope you are all doing well? It glad to see such a wonderful week one contest and we are now in a week two contest, all thanks to God it was a big success. This contest is really awesome because every steemian is expected to have a used both a Decentralized finance and a centralized finance.
The term Defi was derived from two terms which are decentralize and finance, decentralized is the the process of processing, sharing and analysing fact or data in a distributed manner, that is to say the system is connected in a peer-to-peer network format where there are no central node or admin to govern or control the transactions or activities.
DeFi is an can be defined as a term for decentralized finance or peer-to-peer network finance on a public Blockchain technology like that of Ethereum, DeFi populary known a Decentralized finance can easily defined as an emerging financial technology which is usually based on a secure distributed ledgers. DeFi The system removes the control banks and institutions have on money, financial products, and financial services. Finance on the other hand is easily defined as the process of managing of money or asset, investing in money or assets, the borrowing money or asset, the saving of money or asset ,the lending of money or assets, the budgeting of money and assets.
Anybody who can use Ethereum and has an internet connection is eligible for DeFi, a collective name for financial goods and services. The marketplaces are always open with DeFi, and there are no centralized authority that may prevent payments from being made or deny you access to anything. As a result of being handled by code that everyone can inspect and examine, services that were formerly slow and vulnerable to human error are now automatic and safer.
You may lend, borrow, trade, make money, and more things in the booming cryptocurrency market. Crypto-savvy Argentinians have adopted DeFi to avoid catastrophic inflation. Some people have even acquired loans worth millions of dollars and repaid them without providing any personal information.
Importance of DeFi
- It gave investors a option.
Since the birth Decentralized Finance a lot of investors now have a choice, that is to say before the birth of decentralized finance a lot of investors don't like the centralized finance method but the had no other options but since the the innovation of decentralized finance so many now have a choice whether to use the centralized finance or the decentralized finance.
- It revived trust of investors
Before now users had little or no trust for centralized finance because it was ran by humans who are prone to corruption and criminal activities and this gave investors a cause to worry, but decentralized finance came with a unique and awesome technique of running business or transaction which is atleast 90% reliable and better when compared to humans.
- Activities and transaction remain anonymous and private.
Because of the way and format the decentralized finance was developed, it encrypt data and transaction between account owners. So therefore any transactions I make is only between me and the receiving party, since there are no central node who oversees transactions that go on, that can be saved of seen by any third party. Decentralized finance run using a peer-to-peer network connection so every node in the network has total control over what the send and receive, this makes data and information safer and secured.
- International transfer Has been made easy
Before now when centralized finance was the only option of finance, user do go through stress just to transfer funds from one country to another country, infact before you manage to successfully transfer you must have spent a lot of money but with decentralized finance international transfer are now much more easier and cheaper.
- Data are transaction remains original
Because most decentralized finance application were built on strong Blockchain technology like Ethereum and we all know what's a Blockchain, in case you don't know a Blockchain is technology that is similarly the normal database but it starts data in interchanged block that when closed can't be open. This feature has made the decentralized finance data save because it cannot ever be modified or edited when saved.
Defi also known as decentralized finance has really been productive since the day one of its innovation and it's invention, although it still gaining popularity in the current generation due to government policy and rules. I believe in no time it will increase it publicity and become famous for the world to adapt to.
As I have said before decentralized finance is a financial system that make use of peer-to-peer network to connect it's users, uses Blockchain technology to store and protect it's data, uses cryptography to secure and encrypted access into account and use Smart Contact to run and verify any transactions that goes on on the platform like the humans do in the centralized finance.There are no central node, government or administrator to control the activities and transaction s made my it's users, this make is improve privacy of users.
Advantage and disadvantages of Decentralised finance.
Advantages
A decentralized system with fair and open transactions because it's ran by AI which don't have emotional and cannot compromise.
Increased security and transparency are very important features which makes them the best when compared to centralized finance.
The use of blockchain technology and decentralized finance to make it possible for people to invest in a variety of assets with less risk.
Compared to traditional financial services, this type of financial service is often more affordable, transparent, and effective.
- It uses a much secured passcode know as keys, these keys are derived using special mathematical algorithm known as cryptograph.
Disadvantages
- As we all know the crypto market is so so volatile, so therefore liquidity is one of the most crucial elements in a DeFi project. Unquestionably, liquidity is a key component of blockchain protocols and DeFi-based companies.
Transactions can't be reversed, so therefore if mistakes are made it won't be reversed. This might cause loss especially when you don't know the receiver of the asset or fund.
The potential for fraud and the lack of a central body to oversee these transactions are other drawbacks.
If you use a decentralized method to store your savings, you won't be able to access them in the event that you misplace your wallet. If you lose your bank card or bank account, you can still access your money through the centralized banking system.
Advantages and Decentralization of Centralized finance
Centralized finance can be described as a finance system which is controlled by a center node, administrator and government who regulates how and when the finance system should work and when it shouldn't, this means the owners of accounts or asset don't have freedom to do as the wish because they can be removed and deleted at any time the center node wish.
Centralized finance are really popular and famous as this is what have been the oldest means of exchange for a long period of time, the Centralized finance is the opposite of the decentralized finance because of it's features.
In centralized finance, banks, companies whose main objective is to make money while holding your money. In the centralized finance there are several third parties in the financial system that let people move money between parties, and each one charges for doing so.
Centralized finance are really expensive as they pass through so many agents or nodes also known as third parties and all this agent collect charges for that for example, Because businesses are required to pay for your ability to utilize their services, each link in the chain is compensated for its services.
Advantages.
Centralization Finance platforms are very much more flexible when compared to DeFi because you have a wider range of asset to patronize, you can also preform cross-chain and fiat to crypto transactions.
In Centralized finance you get much higher interest rate for depositing fund's and asset in the platform.
It's always legal as it's government backed unlike the decentralized finance which are banned and not yet legalized in so many countries like mine because it mostly support the trading of crypto currencies
In Centralized finance platform transaction can easily reversed if reported to the center node, especially when mistakes are made the central node can retrieve your money with or without the permission of the receiver.
The Centralized finance is not affected by the volatility as much as the decentralized finance is affected by volatility, this is because it mostly known for storing fiat currency which has lower liquidity than Cryptocurrencies.
Disadvantages
- The Centralized finance is controlled by one entity which could called an admin or a center node who controls all the activities and actions in the platform.
- Actions and activities like transaction verification is done by humans who can be compromised at any period of time, this make centralized finance not as reliable as decentralized finance.
Data and information of users are stored in normal database that can be easily compromised, altered and modified at any period of time.
If there is an issues on the center node, like system failure, power shortage or cyber attack, it affects the whole platform would suffer the effects.
- It uses a less secured passcode known as 4 digit code or OTP, for advance security. This is code can easily memorized or guess by any criminal
Yes I have used a Decentralized exchange before now but it was just twice, I made my first encounter with it when I wanted to swap a coin i got from an airdrop into a Tron because it's was not yet listed on so many exchange. Before I continue I want to define a Decentralized exchange is an exchange platform which works as a Decentralized finance system, that is say it's part or a type of a Decentralized finance system.
In this sense I would gladly define a Decentralized exchange as a financial exchange built on a Blockchain technology that platforms financial activities like trading, swapping and so many financial activities in a Decentralized format. A decentralized exchange (DEX) can also be defined peer-to-peer based marketplace where buyers and sellers of crypto currencies meet to make a successful transfer or exchange of assets.
The Decentralized exchange is known as
Pancake swap is a famous decentralized exchange platform Known to be a built on the BNB Chain, PancakeSwap is a decentralized exchange. In other words, it is similar to well-known platforms like the famous UniSwap platform in that users can exchange all their coins, asset or tokens directly without the use of intermediary services.
Pancake swap was discovered and innovated in the month of September in the year 2020 by so awesome developers who prefer not to be known. It was developed basically for exchanging asset in the BEP20 network, despite it was built on binance Blockchain technology but binance don't control it's activities.
Although I Later found out that the coin was a fake coin but I enjoyed my encounter with this decentralized finance because it user it's user interface was so cool, it also has so many features like:
- Swapping of assets
After I noticed the application was as a scam, I wanted to test the exchange so I swapped some USDT to Tron and it was faster, cheaper and easier than I expected .
- Earning Coins
There is still a feature that permit users earn more crypto by farming or participating in pools in the platform, you earn a certain percentage if you participate and follow the rules properly
- Winning coins
You can also win mouth watering awards by participating and winning in the Trading competition, predicting, playing lottery or participating in pottery in the platform. As long as you emerge winner of any of the competition your get your reward straight in your wallet.
- Buying and Selling NFT
This platform has another awesome feature which permit users easily sell and buy Nft project from the Nft market, this makes the buying and publication of Nft project easier for both buyers and sellers in the crypto market.
With the way I'm seeing things I believe that the decentralized finance with grow publicity with more users and followers because when you compare the decentralized finance and centralized finance, the decentralized finance is more profitable to users and account owners, while centralized finance favors mostly the center node that controls all activities that are carried out on the platform.
I also wish the decentralized finance upgrade it's features to settle some of its disadvantages, for example I would love all decentralized finance to give a wait period before fully approving a block so that mistakes in transaction could be reversed in a given period of time.
The decentralized finance is so awesome and I believe so many countries will also adapt to it's features and legalize the use in their countries.
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DeFi attracts many investors to drop their shares here. I like DeFi which only has access between buyers and sellers, but it's different with CeFi where there are institutions that control it.
I also shared a post about DeFi and if you have time please have a look and I'm very happy.
Ok friend I will do that now.
Thank you for your time.
You have given brilliant information about the importance of DeFi, as you said international transfers are made easy as one can quickly send money to anywhere in the world within the space of a minute which can be time-consuming and stressful when going through CeFi, and also the data stored on DeFi can never be removed which eradicate the corruptible act that are sometimes associated with CeFi. Good luck in the contest.
I Am glad 😊 you love the article, thanks for stopping by.
The decentralised finance system is playing a very important role in developing the better and better economical system for the whole word. There are a lot of benefits related to the use of the Defi ecosystem.
This is one of the most important problems that could be faced in the decentralised systems. As there are no contact of the team, so there is always a difficulty at the time of hurry.
Thanks a lot for sharing with us and wishing you a very good luck for the contest.
Yeah you are right 👍 hope this downside get fixed.
Decentralized finance is very profitable, important & full of benefits for us.
Yes , it is the major disadvantage you did remind me. At least a user must have to more mature and intelligent while using decentralized finance. Also, users have to be very careful for using this finance. Otherwise, it's the same disadvantage for CeFi too, I think. Because same there whenever you do lost your assets by mistake you don't have a chance to recover those.
Wishing you Success.
Yea you are right friend, thanks for stopping by
Yes the noni repudiable nature of Defi is a clear cut the demerit as the identity of the users is kept anonymous.
Yes the issues of fraud by tech savvy malaciois elemrs is there but it is muc lesser than that of Cefi.
Good luck
Thank you very much for your good wishes.