Hello Friends , it’s
@besticofinder here. Okey let’s get in to the topic.
Decentralized finance, often referred as Defi is a common term to address various financial applications based on crypto currency. So through this article I’m going to discuss about Defi under following topics.
Content
1.Introduction to Defi (Decentralized Finance)
2.Applications of Defi concept
2.1 Lending platforms
2.2 Decentralized crypto & Fiat exchanges (DEXs)
2.3 Prediction and voting platforms
2.4 Stablecoins
3.Comparison of Defi and direct banking
4. Challenges to Defi networks
5.Advantages of Defi networks
6.Conclusion.
Introduction to Defi (Decentralized Finance)
Decentralized finance can be identified as a child from blockchain technology. The technology which almost all the crypto currencies uses including Bitcoin, Eth and XRP etc. This blockchain technology is a fully decentralized concept and it allows us to track all the transactions with a transparent network. Simply that’s means the user of a particular Defi network will have the full control over his/her money. No human interaction , no regulations , no delays , no taxes .. just a little fee ( a small free compared to SWIFT bank transfer fee’s ).
So we can define the Defi applications as a decentralized , transparent , fast , law processing fee financial system which the user have the full control over his/her money. Defi systems can be used for any complex financial application and there is no limitation for the capacity and that is what blockchain means.
Growth of Defi from 2017 to 2020
Source
As you can see in the above figure Defi is really gaining a massive attraction. The locked money amount in Eth based finance smart contracts shows the growth of Defi networks. It’s really amazing.
Eth’s Defi Applications
Source
Applications of Defi concept
2.1 Lending platforms
The concept of Defi Lending Platforms
Source
The idea of Defi lending platforms is to skip the intermediates or banks from the loan procedure. The smart contracts replace these intermediates and reduces lot of disadvantages faced through current financial system.
There are lot of positive features of these Defi based lending platforms such as transparency in moving money , borrowing and lending flexibility, lender gets a passive income than holding crypto in the wallet , open access to any exchange etc.
2.2Decentralized crypto & Fiat exchanges (DEXs)
Centralized exchanges compared to Decentralized exchanges
Source
Decentralized exchanges can be considered as a use case of Defi. Decentralized exchange means an open source market which is fully transparent and decentralized (No central controller). These exchanges can be used to trade crypto currencies , buy sell crypto currencies and to convert fiat money to crypto and vice versa. A decentralized exchange (DEX) is difficult to be hacked and governments or any authority can’t stop the operation of a DEX. DEX can be considered as a great use case of Defi. There are lot of examples in the industry including EtherDelta , IDEX, BitShares ect.
2.3 Prediction and voting platforms
Prediction markets with Defi
Source
In prediction markets people can bet for the things going to be happen in the future such as competition winners, election winners , sports etc. After introducing Defi for prediction markets , the intermediates of the conventional systems were removed. You can get more info
here Introducing defi has increased the interest of people towards prediction and voting platforms as no government or any authority can’t affect the results .. they are fully decentralized and transparent.
2.4 Stablecoins
When Defi applications are emerging they wanted assets which provides a solution for the price variation in crypto currencies. There comes the stablecoins. We all know what is USDT ( Tether). It’s a stable coin which hold a stable price. There are number of stablecoins in the market such as Binance USD (BUSD),Tether (USDT), True USD (TUSD), USD Coin (USDC), Paxos Standard (PAX) etc. And the stable coins like USDC and DAI were a reason for the recent growth of Defi.
You can find more information about stable coin’s in following references.
Reference 1
Reference 2
Comparison of Defi and direct banking
Defi , end of banks ? watch
Source
There are number of differences between DeFi (Decentralized Finance) and conventional banking system. Defi do not need intermediate agents or companies to process but banks need them. Actually smart contracts replace this intermediates in Defi networks. Decentralized applications (Dapps) which run with blockchain technology run with the help of smart contracts and control programming. There are lot of advantages in this Defi applications than traditional banks. In these Defi applications the transactions and activities are transparent, international (no boundaries), no need permissions, flexible for users. Defi is way above traditional banking system from those qualities. When considering current banking system it’s using very conventional system for decades .. late transactions , higher interest loans, Collateralised Loans etc. And there is another bad news for banks .. many countries working on their own digital currency. We can expect a Defi economy in the world in near future.
Challenges to Defi networks
The are many challenges for Defi when implementing practically for financial applications.
✠ Support from the Community : To develop Defi for every financial application around us .. Defi need the support from the society. Still the Defi applications are limited to small percentage of people who got a sound knowledge of digital application usage. People find more easy to deal with conventional banking system due to complexity of using Defi applications. Defi should overcome this by introducing more user friendly solutions.
✠ Errors from Users : We all know that Defi cut off intermediate agents in the financial network. This means the users have the 100% responsibility over his money. When there is a user error .. there is a possibility where the user have to bare up a money loss. So Defi developers face this challenge to develop Dapps to reduce the user errors as much as possible
Advantages of Defi networks
I already discussed many advantages of defi in each chapter above. Let’s summarize them here.
✠ The decentralized architecture in Defi gives ability to every person in the world to accomplish their financial need without any restriction such as rules, regulations, citizenship etc.
✠ All the fund transactions are automated and no need of intermediate agent. So transactions are fast, secure and only a low transaction fee.
✠ Defi provides users a private key to secure their wallet and personal information.
✠ There is a 100% transparency in Defi networks
Conclusion
Defi is the future of worlds finance. Lot of people investing on Defi believing it will give them large gains. But very difficult to identify good and bad projects as it depends on how people adopt to the concept. We all know what happened to the coin "YAM". It's still risky .. so make your decisions wisely when investing in Defi projects. But I'm very sure it will be the future of finance and the end of conventional banking systems .
Thank you
@besticofinder.
This post is written as a reply to : steemcryptochallenge by @steemitblog
Cc:-
@steemitblog,
@steemcurator01,
@steemcurator02,
#steemcryptochallenge #srilanka #cryptocurrency #steemit #promo-steem #steemexclusive #defi 
Post to twitter :
https://twitter.com/mileswithsmiles/status/1312825409466036226
LinkedIN : https://www.linkedin.com/posts/miles-with-smiles-653541168_challenge-2-diving-in-defi-world-steem-activity-6718591641487331328-LfPg
Hi @besticofinder
Welcome to PH (project.hope) community :) Hope to hear more from you in the future.
I must admit, that I initially couldn't understand much about DeFi and I still struggle to find (or imagine) any real-use cases. Friend of mine recommended to learn about Compound - have you ever heard about this one?
Definetly you introduced readers to world of DeFi in very smooth and easy-to-read way. Great job on that :)
ps. check out comment from project.hope and cyu on our discord.
Cheers, Piotr (ph founder)
Hi , I really haven't heard about Compound.. will have a look. Thanks .. I already joined it
I know this topic very well and tested a lot lately and more on the pipe soon. ;)
Yeah .. I see when going through your last posts ..
I love so much DeFi brings to the market.
Well detailed post from you. I really learn lot of new information from your post. Thank you very much for this great content for sharing with us .
Yes i agree from this Defi we getting lot of benefits bit lot of issues also there.
As a normal person not understand this procedure and not possible to get loan here also.
If they do any mistake he lost all most all his hard money.
Need more user friendly and security too.
Nice post from you.
Have a great day ahead.
#twopercent #india #affable
Thanks for going though my post and for the feedback
Congratulations you are one of the winners of the Steem Crypto Challenge Month...
Thank you for taking part
The Steemit Team
Thank you very much sir !
Dear @besticofinder
Thank you for posting within our community.
Please spare few minutes and read how project.hope is organized and learn about our economy.
That would help you understand more our goals and how are we trying to achieve them. Hopefully you will join our community and become strong part of it :)
Do you use telegram or discord? If you do then join our server and give me a shout. I would gladly share with you goals of our community and introduce to others from our team.
Consider joining our discord server: https://discord.gg/uWMJTaW
Yours,
@project.hope team,
Thank you very much for the invitation
One quick question @besticofinder
DeFi seem to be used a lot as a lending platform. How does it actually work? Can I get USD or BTC/ETC if I would use STEEM or HIVE as collateral?
Have a great weekend ahead,
Piotr