Richard is the founder and CEO of Quantstamp, a company specializing in blockchain-based smart contract security for businesses.
Decentralized finance (DeFi) is a fast-emerging movement in finance that uses smart contracts and tokens to turn standard finance components into trust-free and transparent protocols. The DeFi ecosystem has $700 million in digital assets locked up inside its financial instruments as of December 2019. This figure has just topped $3.6 billion.
DeFi’s attraction is clear: it provides a transnational, transparent alternative to each and every financial service conceivable, including savings, security, loans, trading, and much more. Decentralized apps, or “dApps,” are applications that operate on the blockchain and do away with the requirement for a central authority, as in conventional banking. This implies that instead of having a point of failure, identical standards are kept among thousands of machines through a peer-to-peer network.
While individuals acquainted with bitcoin and blockchain were among the first to embrace the DeFi movement, it has also attracted the interest of more conventional financial actors. According to a recent poll conducted by Fidelity Digital Assets, 80 percent of institutions are willing to invest in digital assets. This is a significant change from several years ago, and it indicates that the organization’s reach and influence are expanding. The Chicago DeFi Association was formed to encourage prospective DeFi businesses by bringing together some of Chicago’s best trade, brokerage, and financial businesses. In this post sponsored by Quatro, we will discuss the ever-lasting effects caused by the DeFi and the changes it brought to our life.
The Potential of DeFi
Long-standing issues and inefficiencies in our present system are being addressed via DeFi programs, which include enhancing financial inclusion, enhancing liquidity, and lowering costs. There is an increasing trend in DeFi and also its potential to improve current systems outside of banking.
You might have heard the terms “composability” or “money legos” if you’ve been following advancements in the DeFi arena. This relates to how ecosystem components may be linked together to create powerful new applications. One component may, for example, enable you to deposit cash and earn interest, while another may let you direct that money to a charity of your choosing.
Another benefit is financial inclusion. Many people take for granted their ability to use conventional financial services, yet this is still a significant issue. Based on the current Global Findex Database, $1.7 billion individuals in the world are unable to obtain basic financial services.
DeFi has the potential to make financial services more accessible to the general public. Dharma, for example, is a savings software that allows users to transfer and earn USD while still making payments on their money. It is accessible to anybody with an email account and internet access since it is borderless.
Sending money across borders is too costly under the existing system. DeFi makes for improved interest rates and lower expenses by eliminating the need for costly brokers.
Challenges in Security
DeFi applications have a lot of promise, but there are still some security concerns. Over the last three months, cybercriminals have robbed over $27 million through DeFi initiatives.
Balancer Pool, a DeFi liquidity provider, was hacked in June, and the protocol was duped into releasing about $500,000 amount of tokens. A re-entrancy attack against dForce’s lending protocol, Lendf.Me, resulted in the theft of $25 million worth of digital currencies.
reposted by : https://ventsmagazine.com/2021/06/07/how-defi-changes-your-life/
