DeFi system components and technical/financial functionality
In my previous post about the importance of smart contracts in the DeFi system, we talked about how this type of digital contracts basically eliminate the intermediaries of the traditional centralized processes and applications by providing automated processes that simplify the execution of financial operations, in this sense and with the objective of complementing the information in this opportunity I will describe some relevant aspects about the components and financial technical functionality of the DeFi system.
Before continuing, it is worth remembering that decentralized finance has been at the peak of blockchain technology in the last two years, specifically in the world of cryptocurrencies, because DeFi applications have tokens that have been among the digital assets with the best financial economic performance, offering investors very attractive returns.
However, despite the success of decentralized finance, it is no secret that most cryptocurrency holders or investors are still struggling to understand the technical and financial elements behind the DeFi system, hence the reason to outline in a simple way how it is constituted and what is the technical and financial functionality of DeFi applications.
Although the main component of the DeFi applications is that the commissions for executing operations are very low, due to the fact that they require minimal maintenance, additionally the DeFi system is made up of the following components and technical-financial functionalities, namely:
A. Decentralized blockchain technology software.
B. Technological protocols that offer financing without regulatory restrictions and without intermediaries.
C. Financial services in the form of loans, deposits, credits, and decentralized exchanges.
D. Management of monetary policies to issue Stablecoins through MakerDAO.
E. Execution of automatic, secure and flexible transactions.
F. Transaction history record.
If you want to interact with some components and technical-financial functionalities of the DeFi system, I invite you to visit the WoxDefi application is a platform that runs on the blockchain and is hosted by friend @Xpilar.
In the next post we will talk about the differences between classic finance, centralized cryptocurrency exchanges and decentralized cryptocurrency exchanges.
SOURCES CONSULTED
Forbes Decentralized Finance Is Building A New Financial System. Link
OBSERVATION:
The cover image was designed by the author: @lupafilotaxia, incorporating image: Coinquora
Greetings @lupafilotaxia _
DeFi's are undoubtedly an investment alternative and every day they consolidate a little more despite as you mention that there are still technical and financial elements that are not very clear for investors, to be able to make transactions without intermediaries is determinant in this type of investment.
Thank you very much for sharing your publication
Hello @ dgalan
Yes, the DeFi structure still has a long way to go to consolidate, but this may be the right way to improve the financial systems.
Best regards, be well.
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Very good and valid points made on the functionality of DeFi system although in the aspect of security a lot of DeFi systems lack proper audit systems which have made several DeFi system to be vulnerable for hacking thanks for sharing.
Hi @mccoy02
True, still need to work on more compliant auditing systems.
Best regards, be well.
DeFi is a fast growing area in blockchain. No doubt, it has a lot of potential.
Hi @oguzvic
A very good potential. Thanks for leaving your appreciation.
Best regards, be well.