Steem Crypto Challenge Week 2 | Diving Into Defi

Hello steemians welcome to my blog, This post is in regards to the contest by @steemitblog Week 2 challenge of the steem crypto challenge month. The week 2 is actually talking about "Diving into DeFi". You know what that means? Journey with me as I will throw some lights on the topics below.

What Can Someone See DeFi As?.

Actually, I have been in crypto for up to a year without some good knowledge of how it works, but after some research about this DeFi I could now tell you that at least 85% knowledge of it has been stored in my memory. Let's dive into DeFi Now.

What is DeFi? DeFi in abbreviation means "Decentralized Finance" yes! Decentralized finance, it is just like a financial service that was build on the blockchain that can be used to store money. DeFi is in Quote refers to as "the digital assets and financial smart contracts and decentralized application[DApps]".

When talking about DeFi we have to consider first, How our traditional banking or finance started. Traditional finance has been been there for years, our own local currencies were invented to make things easier and it has been helping on the aspect of higher levels of economic initiations.

You trust your local bank to carefully store your money so as to earn profit as a result of interest, but reverse is the case because most of this financial institutions are not being trusted because most at time the investors receive small amount of what they invested. But DeFi is completely different. The ambition of DeFi is to create a financial system that will be open to anyone there by reducing the trust of investors in central authorities.

graphics by finematics

Today with the help of blockchain technologies, this ambition is been actualize, you can do any financial transaction without the notice of any central authorities, that is what DeFi is aiming at. It gives full control to every individual's finance. Like I said earlier, it is build on the Ethereum blockchain. Ethereum in quote is a "Blockchain that maintains a shared ledger of digital value". You can just do any transaction without the centralized authority using the blockchain's currency Ether(ETH) in a decentralized format.

Today, programmers can just come up with the idea of developing apps that can be able to store and manage digital assets. This is where DApps came up. DApps is the full meaning of "Decentralized App" they are also seen as smart contracts agrees on the laws that governs the Ethereum blockchain. DApps is been programd to run on only Ethereum network.

DeFi has given the internet world the opportunity to become financially free. In our current world, with an internet connection you can access with any decentralized apps or smart contract that is built on the Ethereum blockchain.

Currently, The DeFi crypto market cap has over $11 Billion increase for the 24hours. Since I am new into crypto I have not been able to accumulate any DeFi related token but as time goes on I will look forward of accumulating.

What Makes Me Feel Excited About DeFi

DeFi is the trending topic in the world of crypto today. After deriving some knowledge from my recent research about DeFi, I could give you reasons why I love DeFi. Over the years DeFi is said to be the most fastest in terms of lending money to its borrowers. On like our local banks where you deposit money with the mindset of earning interest from the bank as a result of other users borrowing money.

In the case of DeFi the assets becomes digital and DApps connects The borrowers to the lenders using the protocols of loans to distribute their interest without the need of trusting any one, this in return, brings much more higher interest. All I am saying is that with DeFi you can earn more income by lending out your tokens.

Instead of keeping your money in the local bank, it is advised that you forward it to any Lending DApp. There are smart contracts that allows secured loans with more collateral than the borrowing value. Check one below:

MakerDAO:

^{MakerDAO current stats and charts By Defi Pulse}

MakerDAO is one of the best lending DApp that is said to allow you to lock in ETH for a stablecoin called "Dai" this token is pegged to the price of USD. Dai in quote is a "way of for tokens holders to access liquidity at the cost of an annual interest rate" this stablecoin is said to be the most popular coin in the DeFi world. I love DeFi.

Which project do I think is best for the DeFi application? And why?

Over the years since DeFi evoluted, there has been many projects bubbling around this innovation. But among all the projects I think the one I talked about as one of the best lending smart contracts being "MakerDAO" is the best project for the DeFi application.

With over $1 billion in assets committed, Maker is by far one of the most recognized decentralized finance applications in the market. It has a market dominance of around 60%, and about $600 million worth of digital assets are currently locked in Maker protocol smart contracts.
^{Citation needed}

Why I choose MakerDAO.

This project allows its users to access millions of dollars worth loans, it uses the Dai stablecoin to denominate the loans. It is one of the best lending DApps in the DeFi market. This smart contracts allows its coin holders to lock their Dai token in to what they call - Dai Savings Rate (DSR). It is a maker's DSR contract that enables the user to earn interest rate in the stability of the fees generated by Dai.

What's the Mechanism of MakerDAO DApps.

There are many decentralized apps with lots of mechanism, here I will also talk about the MakerDAO project. As this platform is among the best smart contracts of DeFi industry there are some mechanism that it uses to carry out its activities. This means that as it a lending platform it said to work with some protocols.

In the Makerdao platform it has what they call CDP this is abbreviated as Collateralized Debt Position. It is a financial crypto concept that was initiated by this makerdao to help stabilize the price of Dai, and also to make trading easier.

The Collateral Debt position helps users to deposit into the decentralized app as a collateral for loan. As soon this mechanism is been initiated the trader can now generate a USD value in Dai that He borrow. With this method the trader can now use the Dai currency for any transaction on like other cryptocurrency.

My Take and Feeling For this New Evolution.

I am very much delighted with this evolution of DeFi. I started learning about crypto when I joined steemit with some basic knowledge of how it works. But after my dive into the world of DeFi I could affirm to that in the nearest future people will become financially free. In most of the country where individual are limited to certain level of finance, I see this industry as something that will break the bondage of poverty.

graphics by @stephenkendal

The future of DeFi is very clear and bright, I hope to dive more deeper into this DeFi evolution. Thanks to @steemitblog for such a nice contest that broadened my knowledge on Decentralized finance.