DeFi stands for decentralized finance and is a development that is revolutionizing the current centralized financial system. DeFi creates a new economic system that provides open access to financial services for everyone globally, no matter your location or background. With DeFi, you get instant, clear, permissionless access to any of the financial assistance you might need.
DeFi achieves this by relying on smart contracts, blockchain technology, and cryptography. Most of the DeFi projects today are built on Ethereum. The main reason for this is because of Ethereum’s sturdy programming language Solidity.
Solidity allows for the writing of advanced smart contracts that contain the necessary logic for DeFi applications. Ethereum also carries the most developed ecosystem across all the smart contract platforms, with developers building new applications every day.
On DeFi platforms, the middleman is no longer the banks but instead a technological intermediary, which helps reduce the costs significantly.
DeFi offers new and improved services than their traditional finance/banking counterparts and such services include payments, trading, lending, and borrowing in a more efficient, fair, and transparent way.
Similarly, DeFi applications provide almost instant settlement globally. This is because DeFi protocols operate with no or minimal human involvement.
- ChainLink has a transaction time of 5 minutes worldwide. While traditional banks use between 1–4 days for overseas transactions.
One final key difference between DeFi and traditional finance would be the transparency of information. This is a vital issue with the conventional financial industry with layered/hidden fees and unequal practices providing more opportunities to the wealthy.
With DeFi, everything is transparent and visible on the blockchain – trading volume, the number of outstanding loans, and even total debt. It can reliably check for all of these on the blockchain and the numbers could not be tampered with.
- Websites like Etherscan will enable you to search the Ethereum blockchain for transactions.
Decentralized exchanges have skyrocketed in volume in the last few months, from $39.5 million in January 2020 to $43.5 billion in January 2021. That is a 1101x increase in one year. While the DeFi space keeps getting bigger and better, we can expect even higher increases in volume and other measures related to the DeFi space.
IX Swap is building a decentralized economy for the STO ecosystem, allowing all users and ecosystem providers to take part, share, and reap the benefits of a transparent, decentralized economy.