DeFi crypto and the concept itself operate on blockchain technology, the same one utilized by digital currencies. The intention is to transform the financial system and become more open to it.
DeFi is an abbreviation for decentralized finance. It refers to a relatively modern and distinct financial structure that operates independently of centralized intermediaries. Some of those include banks, insurance funds, and so on. People can send DeFi crypto peer-to-peer through smart contracts using DeFi. This eliminates the need for other regulatory bodies to interfere.
During last year’s so-called “DeFi summer,” the number of smart contracts rose to over $20 billion in just a few months. The increase made this phenomenon very popular.
It does not seem like much in comparison to the financial environment we all know, but DeFi looks set to continue increasing its appeal. To put it simply, DeFi crypto, or decentralized finance, is a financial mechanism with no boundaries that is free and transparent too.
DeFi crypto and its benefits
Ethereum is the most common blockchain, and it is where the majority of DeFi contracts and apps are built. The Ethereum network has been dubbed “the new internet” by many. That’s because of its ability to decentralize many resources and put users from all around the world together in one place. The Ethereum network’s cryptocurrency is known as Ether token. It is actually the second most used cryptocurrency after Bitcoin.
The origins of DeFi crypto can be traced back to Bitcoin. This one managed to build a brand new financial infrastructure built on blockchain technology in just 12 years. At the moment, it is worth over $800 billion. It was also developed as a necessity for individuals who, for instance, do not meet the criteria to start a conventional bank account. So, instead of putting the money in a bank with complete control over it, you keep your digital coins yourself. This way, you are free to do whatever you wish with them.
Some benefits of DeFi include the ability to move funds at any time from anywhere in the world. Also, to transfer them to whomever you choose. You no longer need a regulatory agency to oversee your activities. These transactions are much faster and less expensive than through a bank, for example.
DeFi seems to be moving in the right direction. It probably won’t take long before it expands even more. In the context of the ongoing global pandemic during which people turned even more towards the digital world, the future seems bright. Financial institutions are slowly losing their grip which is why they are so against crypto in general. However, they will soon have to overstep their boundaries and keep up with the modern financial environment.
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