What is DEFI, Difference between Decentralized Finance VS Centralized Finance

Hi friends, I my today post I talk about the meaning if DEFI. Why it is different from Centralized Finance and my opinion about it.

Lot of them thinking decentralized finances is opposite to centralized finance. It has the power to change complete centralized finance soon.

But it's not so easy decentralized finances having a lot of limitations. For accessing this or using this platform we need crypto knowledge otherwise we cont do anything.

Normal persons not possible to understand this lending, borrowing normally. They need full knowledge of crypto. How to link metamask, how to store their private keys.

If the missing anything their complete hard money will get loose, no one not possible to retrieve back.

Centralized finance means our Banking system. Here we can do a lot of things with minimum knowledge, no need more. For our needs Banks give good services. A normal person can access very easily.

Difference between Decentralized Finance VS Centralized Finance**

Now I talk about major differences between the two platforms.

Coming to Decentralized Finance

-Need crypto knowledge, otherwise not possible to use this.

-In Remote areas not possible to use.

• As a like banking system, we can't use Defi

• Good Network connection needed

• For borrowing loans, we must put collateral amounts first.

-It is good for lenders only not for borrowers.

• For lending, we get returns according to market conditions, not fixed.

• For lending our crypto we get interested along with additional crypto assets too
  It is a good advantage here.

• Here we have full rights to access our assets, no one does not have any rights, even that lending platform also not possible to touch those.

• We can remove or repay as per our needs.

• In comparison to normal Exchanges this type of Decentralized platform gives more security.

• If we lose our private keys not possible to retrieve our assets back. So need to save those keys very securely.

• Anyone can create accounts very easily, no need KYC, no need credit score for taking a loan.

• This platform work on the Ethereum blockchain so for each transaction so need to pay the GAS fee. In the current situation, those are very high. For small investors, it is not a good choice.

• For lending and borrowing we get additional coins here.

• no need documentation but need crypto knowledge.

• within a second we get a loan here. No need to waste our valuable time.

Coming to Centralized Finance

• For account opening, we need to provide huge documents.

• This system work under Government Rules.

• For loans, we need to provide surety

• For loan we need to submit a lot of legal documents, there is a long process. It takes time up to 3 weeks also in some cases.

• We need to spend our time and need to maintain our credit score otherwise we don't get loans easily.

• Basic knowledge also no need, anyone can access very easily.

• no need for a network connection and mobile for this process.

• All most all area there is good bank services available. So no need to depend on others.

• in showing our properties we get loans very easily.

-Interest rates are also reasonable.

• No need any special security needs here, if we lose any papers we can recover those very easily.

• Here we dont need to deposit any additional money for getting loans.

• a lot of loans available as per needs we can choose those.

Overall Opinion about Decentralized Finance

I think the last 6 months we see here hipe if Defi, but in my opinion, that's much hipe for this platform is no need. I don't say it is worthless but it giving good returns for investors but not borrowers.

Because here we need to first deposit our funds. From our collateral, we get a 70-75% loan. For this, we need to pay additional interest in taking a loan.

Means first here we need deposit crypto assets as security 🔐 , based on those they give 75%loan for as. Again we need to pay interest.

Here we get interest in deposits also, but loan interest is higher than that.

In my opinion, this finance system for investors only, using those normal small crypto holders nothing gets anything.

Who lend their asserts here they get good returns according to market conditions.

But for decentralized finance we get higher interest compare to banks. This is the main advantage. In general, banks give 5-6% interest in our savings, but in finance, we get 8-10% easily. For saving our money banks we don't get that's many returns.

If we invest in Decentralized finance we get good returns along with additional coins too.

So for savings or lending our money Decentralized finance is a good choice but needs crypto knowledge. For borrowing this platform not a good, a centralized platform is a good choice.

Thanks for reading

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