The Latest About Decentralized Finance

In recent months, the so-called Decentralized Financial Movement (DeFi) has exploded in the US and Europe. [Sources: 7]

In the last two years, decentralized financing (DeFi) has evolved from a blockchain – a fintech sandbox based – to a platform on the Ethereum blockchain, where borrowers, lenders, and investors can do banking – much like transactions without banks. Decentralized financial systems, also known as “open financial systems,” are not limited to the one blockchain. This category includes virtually all financial services that are based on blockchain, including financial services such as credit cards, mortgages, loans, insurance, securities, and more. Most of these projects were built around Ethereum, but new ones are constantly coming on stream. All, except Bitcoin and the Lightning Network, have built their own version of the blockchain on or above the blockchain of Ethereum. [Sources: 6, 15, 17, 25]

One of the latest additions to decentralised finance is cryptocurrency lending, driven by various services such as DeFi, Lending Club and LendLoan. [Sources: 17]

Two examples of decentralized currencies are stablecoins, a coin used on the Bitcoin platform, and Ethereum, used by many of the world’s largest financial institutions, including JPMorgan Chase and Goldman Sachs. Stablecoins offer the programmability of crypto without the downward volatility that is seen in traditional cryptocurrencies such as Bitcoin or Ethereum. The protocol, which is normally built on Ethereum, is beginning to break away from the traditional uses of Bitcoin as a store of value, as it moves toward the use case of a decentralized currency. [Sources: 18, 21, 24]

In decentralized finance, smart contracts allow developers to create a cryptocurrency that they can simply send or buy. But the crucial difference between DeFi and fintech is that it is building a traditional financial infrastructure that uses something new, blockchain technology. [Sources: 5, 20]

It is hard to imagine a world in which decentralized finance will completely replace its centralized counterpart unless governments and central banks suddenly cease to exist. [Sources: 10]

After all, Bitcoin and Ethereum are not the only cryptocurrencies that could be used to change the way the global economy works. What crypto has to do with a global market is shielded from fiat-based economic phenomena, and I believe that there is great potential for decentralised financial markets in the coming years. But don’t worry, there will be no need for centralized exchanges and networks like Bitcoin or Ethereum to solve all the problems of the traditional financial system. Decentralised finance has many advantages, from ease of use to lower transaction costs. [Sources: 3, 10, 12, 16]

The new world of decentralized finance would be shaped by cryptobased financial services such as Bitcoin and Ethereum. Financial technology, or FinTech for short, may initially appear to be a technology that also aims to use technology to improve financial services, but it is really more than that. [Sources: 12, 22]

In short, DeFi’s ecosystem will provide a decentralized financial system built on the Ethereum blockchain, the world’s most popular blockchain platform. It is a blockchain-based financial service that maps traditional financial services to create new services and derivatives derived from the unique features of blockchain. [Sources: 1, 19]

Simply put, DeFi is a financial ecosystem of decentralized applications (DApps) built on Ethereum’s blockchain network. It is commonly referred to as a decentralized application, supported by a blockchain that is one of the most popular blockchain platforms in the world and a key component of blockchain technology. [Sources: 2, 9]

Decentralized financial services, often referred to as DeFi (which is a really short letter), are the form of financing that is not based on a centralized regulatory system like a bank. It describes a new decentralized financial system based on the public blockchains of Bitcoin and Ethereum. De Fi, also known as Open Finance, is an ecosystem of financial services such as borrowing, lending and trading, built on decentralized applications (DApps) on the blockchain network of Ethereum, a public blockchain platform. [Sources: 10, 11, 20]

The Ethereum blockchain is the primary source of intelligent contract development, while other public distributed ledgers are being developed around the DeFi protocol. Decentralised applications based on Ethereum’s smart contracts include, in particular, the rise of decentralised financial services (de-fi). [Sources: 14]

One of the most useful services that decentralised finance offers its users is the ability to use volatile cryptocurrencies as collateral for loans and stable coins. In the blockchain area, it is possible to make this accessible to everyone, anywhere, through smart contracts, smart tokens and decentralised financial services. [Sources: 8, 20]

There is an effort called Decentralised Finance (DeFi) that is gaining momentum, and we have already talked about it on the Internet of Value. In the simplest sense, decentralized finance is basically a combination of decentralized financial services, smart contracts, blockchain technology, and smart tokens. De-fi and decentralised financial markets have been at the forefront of a number of blockchain projects, including Ethereum, Bitcoin, Ethereum Classic and Bitcoin Cash. [Sources: 4, 22, 23]

The roots of decentralised finance can be traced back to Ethereum, where much of it has remained under the radar. The first cryptocurrency, Bitcoin, is still the blockchain’s best-known application, but the technology has since begun to show promise in other areas and has slowly spread. [Sources: 0, 13]

Sources:

(0): https://blog.chromia.com/decentralized-finance-defi-introduction/

(1): https://www.asiablockchainreview.com/a-primer-on-decentralized-finance-defi/

(2): https://ilaw.co.uk/decentralized-finance-defi-ned/

(3): https://cointelegraph.com/news/the-importance-of-developing-the-decentralized-finance-space

(4): https://cryptotips.eu/en/knowledge-base/what-is-defi-decentralized-finance/

(5): https://www.somagnews.com/what-is-defi-decentralized-finance/

(6): https://www.bankingexchange.com/cards/item/8339-the-rise-of-decentralized-finance-and-why-banks-should-start-paying-attention

(7): https://en.ethereumworldnews.com/chainlink-looks-to-bring-privacy-to-ethereum-decentralized-finance/

(8): https://www.trendingtopics.eu/defi-markets-meltdown-performace-blockchain/

(9): https://intlbm.com/decentralized-finance-is-making-a-lot-of-news-however-not-as-per-the-global-expectations/

(10): https://www.visualcapitalist.com/decentralized-finance/

(11): https://www.datadriveninvestor.com/2019/10/30/decentralized-finance-future-or-farce/

(12): https://www.forbes.com/sites/ilkerkoksal/2019/09/29/the-shift-toward-decentralized-finance-why-are-financial-firms-turning-to-crypto/

(13): https://www.deltecbank.com/2020/07/15/the-latest-trend-decentralized-finance-defi/

(14): https://blog.okcoin.com/2020/06/23/what-is-decentralized-finance-defi/

(15): https://news.bitcoin.com/decentralized-finance-projects-are-starting-to-ship/

(16): https://www.lexology.com/library/detail.aspx?g=6e102ca1-31b5-46a2-89cf-83934497c59e

(17): https://www.bitrates.com/news/p/crypto-lending-the-latest-trend-in-decentralized-finance

(18): https://www.benzinga.com/markets/cryptocurrency/19/08/14233884/decentralized-finance-defi-challenges-the-global-financial-system

(19): https://blockchain.news/wiki/Decentralized-Finance-DeFi

(20): https://www.exodus.io/blog/what-is-defi/

(21): https://blog.coinbase.com/a-beginners-guide-to-decentralized-finance-defi-574c68ff43c4

(22): https://www.tradefinanceglobal.com/posts/saving-the-finance-world-with-decentralized-finance-defi/

(23): https://gatehub.net/blog/what-is-decentralized-finance/

(24): https://www.investopedia.com/terms/d/decentralizedmarket.asp

(25): https://blog.makerdao.com/decentralized-finance-defi-trends/