First introduced in 2020, the term is gaining momentum and becoming popular as the prime use case of digital currencies today.
Will DeFi ever rule the world? Why it’s becoming so popular term?
Where many people still call Decentralized Finance a passing fad, companies across the globe have been starting to implement technologies such as Blockchain in the financial part.
As Decentralized Finance is set to mark its presence in the industry, there are many who don’t really know what DeFi is. If you find yourself among them, we got your back.
What is DeFi?
Let’s understand this by discussing Bitcoin.
Bitcoin is a digital form of money that isn’t controlled by any central authority or government. The cryptocurrency can be transferred to anyone sitting in any part of the world without the need for a bank or any financial institution playing their part.
And that’s what make it decentralized money.
Yes, Bitcoin is decentralized money that can be used to store, exchange and make payments.
However, transferring money is just the first of several building blocks in a financial system. Apart from sending money to one another, there’s an assortment of services we use today. For instance, stock markets, insurance, saving plans, and loans are all services built around money and together create our financial system.
At present, our financial system and all its services are centralized. Banks, insurance companies, stock markets and other financial institutions all have someone in-charge having control of the domain.
Such centralized financial systems come with their own risk of mismanagement, corruption, fraud, to name a few.
What if we could decentralize this financial system entirely in the same way as Bitcoin decentralized money? That’s what DeFi is all about.
What’s There for DeFi in 2021?
There’s no doubt that DeFi or Decentralized Finance could achieve the spotlight last year, which was visible in the prices of DeFi tokens multiplying throughout the year.
According to the reports, people locked up millions of dollars’ worth of their crypto holdings on smart contracts via DeFi sites. Where is DeFi heading in 2021?