The Role Of Decentralized Finance In Banking The Unbanked

Source

INTRODUCTION

Decentralized finance simply means finance that is decentralized, basically if finance is anything that has to do with the exchange and management of money and decentralization means the freedom from centralized authority or intermediaries therefore decentralized finance can be said to be the management of money without the need of a third party authority.

Decentralized finance since it's introduction into this age and world has done a lot of good, it has improved and developed the financial industry as we know it, also, the features and services it offers are second to none, it implements blockchain technology, it allows for the facilitation of peer to peer financial services, it increases transparency in financial transaction processes and implements the use of smart contracts.

In this post of mine I will be explaining and discussing some of the significant ways in which decentralized finance is setting itself up to play the role of becoming the bank of the unbank population.

• BY PROVIDING ACCESSIBILITY TO FINANCIAL SERVICES

In this our present age of technological advancement it might come as a shock to many that there a significant number of people or a population of people who are literally unbanked, meaning they do not make use of banking services the only reason I can think of for this is that they do not have access to this banking services in their countries or it is just too expensive to maintain.

With this being said, the first way in which decentralized can actively play the role of bank to the unbanked populus is basically by maintaining its digital and decentralized nature which eliminates the need for any centralized authority to serve as an intermediary or high cost of opening and maintaining a bank account.

Therefore anyone in these countries as long as they have a phone be it android or apple with a network connection and mobile data can download the decentralized finance based applications on their phones and their they can carryout any kind of financial services they want on their phone with little to no cost at all.

• BY FACILITATING CROSS BORDER TRANSACTIONS

One way that decentralized finance is setting itself up and playing the role of bank to the unbanked, is that it is adapting its technology to facilitate cross border transactions by addressing the issue that is common with the use of the traditional banking system which basically are high transaction fees and delayed transaction processing.

Source

Additionally, since decentralized finance operate on blockchain technology, it basically takes advantage of this technology, adapting it to facilitate and enable increased transaction processing time or speed and lower or very low transaction fees when it comes to cross border transactions.

So let's say we use cryptocurrency, a decentralized and digital currency which can transfered to anywhere in the world in minutes to perform a cross border transaction, we can then now use a decentralized finance application to facilitate or provide exchange services, converting the cryptocurrency into the currency used in that country.

• BY ENSURING TRUST THROUGH TRANSPARENCY

As I have already established in the beginning of this post of mine, decentralized finance operates on blockchain technology and if there is anything the blockchain technology is known for or to be built on, is its advanced security protocols, decentralized nature and its transparent immutable ledger with which it keeps records of all transactions.

With that being said and to hit the nail on the head, the blockchain is known to be transparent and owing to the fact that the decentralized finance and its applications operate on the blockchain it also is transparent and can offer transparency to it's users by keeping a easily accessible tamper proof records of transactions.

Another logical reason why there exists an unbanked population in the world is because many do not trust banks and the transitional bank systems because they lack transparency and do not feel the need to assure their users of the safety of their money but the decentralized finance platforms is not like this and have chance to become the bank of this unbanked people by earning their trust.

• BY OFFERING SAVINGS AND INVESTMENT OPPORTUNITIES

Another way in which decentralized finance can actively play the role of becoming bank to the unbaked is by catching the attention of the unbanked population wherever they might be in the world and offering them its new and unresistable savings and investment proposals and opportunities.

Let us not forget the potential for decentralized finances to achieve this owing to the fact that they are superior to the traditional financial systems and can offer to its users opportunities like yield farming, staking opportunities and accounts that bear interests over time.

Additionally, these services basically provides users of decentralized finance opportunities to earn returns on their savings which will be cryptocurrencies and as a result encouraging and incentivizing them to continue using the decentralized finance platforms over a long term.

CONCLUSION

Source

I would like to say a very big thank to everyone who made the effort to read and go through this post which I have made, and I hope that you have been able to learn a few things for example, like some of the significant step and features decentralized finance possess that allows it to be able to become the bank of the unbanked population.

Some of these significant roles and features, the one in which I took my time to discuss and explain in the above subheadings are as follows; by offering savings and investment opportunities, by ensuring trust through transparency, by providing accessibility to financial services and the last but not the least, facilitating cross border transactions.