Decentralized Finance (DeFi) an Emerging Trend. Why Is It Better Than CeFi?
Updated: Aug 14, 2021
DeFi eliminates brokerages, exchanges, banks, financial institutions and other intermediaries from the equation and makes the transaction from person to person, making it a global decentralized financial solution that is swift and secure.
Decentralized finance or DeFi is the new way to execute financial transactions. It is conducted over the blockchain and eliminates the need for a traditional financial institution such as a bank and other intermediaries. It avoids delays, brokerages and other complications associated with a traditional financial system yet giving the same services similar to a bank.
“DeFi is not only for financial transactions but it acts as a crypto bank where users can get interest on their crypto holdings and earn crypto on a variety of different ways.”
DeFi platforms are mostly created using Ethereum but can use other platforms also. It's a collective term used for a range of financial products and services that is accessible to anyone with an internet connection. A significant difference between CeFi and Defi is that DeFi markets are always open and there are no centralized authorities who can block or deny access to you. It eliminates human errors and slow services since it is handled by code that can be inspected and scrutinized.
Consider DeFi platforms as a crypto bank created on the blockchain. A user can get all the benefits of using a bank without the hustles of the CeFi system since its transactions are based on peer-to-peer. A user can get better benefits through a DeFi platform since they can lend, borrow, long/short, earn interest, and spot trade.
What Is The Future?
Think about receiving your salary in cryptocurrency. Some companies have already started to pay their employees using cryptocurrencies. The traditional financing system doesn't grant access to everybody to set up a bank account or use any financial services. This lack of access to financial systems will prevent people from getting employed. The traditional financial system can block you from getting paid and there are hidden charges associated with the CeFi systems. Trading hours and business hours for different time zones create a huge delay in international transactions as well as markets. Apart, from all these, human errors are inevitable in a CeFi system and because of intermediaries, the service charges are very high for a traditional system.
DeFi eliminates all the hustles and troubles of the CeFi system. For example, we have started accepting cryptocurrency as payment from both international and domestic clients. Not just that we even give our quotes on cryptocurrency. We accept USDT, QUSD, BUSD & USDC as payments. This enables us to receive payments within minutes from international clients as well as domestic clients. We use DeFi platforms to earn more crypto using these payments before liquidating it and earn more than what we have quoted. It's a perfect example of how a DeFi platform can help companies as well as individuals to earn extra from what they actually have.
What Can you Do With Defi?
Understanding DeFi is easier when you understand what you can do with it.
Make financial transactions across the globe in an instant
Trade using dynamic currencies and earn income
Use stable currencies to make and receive payments
Stake your cryptocurrencies and earn extra on your holdings
Save and earn cryptocurrencies
Borrow funds with and without collaterals
Buy NFTs
Create a financial portfolio
Access decentralized insurance.
How Does DeFi Work?
There are two things that make DeFi possible, smart contracts and cryptocurrencies. The smart contract replaces the need for a financial institution. A smart contract is an Ethereum account that can hold, send and refund funds based on certain conditions. It is a programmable code that no one can alter as long as it is live. Smart contracts can be inspected and audited by anyone since it is public, hence, maintaining transparency and easier to identify malpractices, meaning it can come under community scrutiny pretty easily.
Consider this scenario in which we have created a smart contract to pay out our employee John every Friday. The smart contract will keep on doing it as long as the company account has sufficient funds in it. Once the contract is implemented then no one can change the contract and add a different person to this contract for payouts instead of John.
This is just an example of how smart contracts can replace a financial institution. There are various ways a smart contract can help a DeFi platform operate.
What We Can Do For You?
WeDoDigital (WDD) has been helping businesses to create cryptocurrencies, DeFi platforms, NFTs, DApps, to meet their business requirement. Blockchain is a technology that has a huge potential to change the future. We had realized this at an early stage and invested our time and effort to build a great reliable team that businesses can trust for their lifetime. Companies that operate on cryptocurrencies and DeFi platforms need a team that they can trust and rely on, so we created a platform called WDD Evolute, a system where we help companies not only to create robust, reliable and secure products but we become part of them to guide, help, maintain, create marketing as well as operational strategies and implementation of the same.
Blockchain can be expensive for startups, WDD Evolute is created to help those who need an extra hand in bringing their dream to life. Talk to us today to know more about what we can do on the blockchain.
