From market giants to well-known investors and businesses worldwide, everyone is betting on blockchain projects. While some still don’t understand why everyone knows that blockchain is a trend in the tech world. Since blockchain technology offers a variety of benefits and opportunities for individuals and traders alike, there is no surprise that new projects are entering the market on a monthly basis.
Even though blockchain has long been associated only with cryptocurrencies or tokens, the technology now has much more use cases. Companies such as Amazon, IBM, Google and small startups are embracing the underlying technology behind digital assets — blockchain — to boost their services and business processes.
Another myth about cryptocurrencies is that they are only used as a medium of exchange. However, thanks to a new hot topic in the finance world, known as DeFi, has brought every financial service you can imagine, whether it’s borrowing, lending, payment or derivatives, based on the blockchain.
Decentralised finance (DeFi for short) is a term used to describe financial apps built on top of blockchains using smart contracts. Smart contracts are, what the name suggests, self-executable programs written on the blockchain that perform transactions when a set of rules and conditions are met.
Even though DeFi is incredibly popular, not everyone knows why to consider Decentralised finances as a new way to invest money and gain a profit. Let’s explore the key reasons below:
Decentralised, Secure and Transparent
DeFi doesn’t rely on or need a central entity like traditional finances. As we mentioned, DeFi applications use smart contracts that can be viewed by any interested party. In addition, users are allowed to participate in the governance process of DeFi applications by voting on the platform proposals if they hold assets. In short, since DeFi is based on blockchain, it is transparent and governed by the community instead of banks or any other authority.
From cryptography to secure storage of data, DeFi has all the security features that blockchain has. In addition, the code of smart contracts also exists in blockchain technology. However, you need to choose DeFi apps which smart contracts are audited by reputed, independent auditors.
If you want to start using DeFi now, you may consider using services like Merlin, designed to help newcomers and experienced traders manage their portfolios easier and more effectively.
DeFi Gives Total Control
All services provided by traditional finance are tightly controlled by central entities. However, this usually has lots of challenges and fees, making the process costly while also having low transaction latency, entry barriers and more. In fact, users have less control over their funds than over traditional finances. In contrast, DeFi reduces the need for intermediaries from financial services offering users total control over their money.
DeFi is Available for Everyone
The main reason why Decentralised finances are believed to overcome the traditional financial ecosystem is its ability to provide simpler, borderless and more affordable financial services. DeFi apps are spread over a variety of financial services, including payments, decentralised exchanges, stablecoins lending, borrowing, yield farming, prediction markets, and insurance, to name a few.
Since DeFi attracts attention from market giants and investors, the market develops rapidly, offering new products almost daily. For example, what is the regular process of getting a loan from the bank? You submit lots of papers and go through complex procedures. In contrast, DeFi space allows you to quickly and easily get a loan by depositing the collateral and getting your money directly to your wallet.
DeFi Reduces Chances of Corruption and Monopoly
In contrast to traditional financial systems, DeFi apps are governed by the communities holding assets. In addition, the terms on which DeFi projects run can be viewed by everyone, thanks to the transparency of blockchain and smart contracts. Therefore, in order for any proposal to be approved, a majority consensus is applied. This leaves no room or chance for corruption in the DeFi space. The same applies to monopoly since the underlying code is open to all. Everyone is available to participate in all discussions.
Early Mover Advantage
Even though the first DeFi projects entered the space a couple of years ago, the DeFi industry is still in its infancy. Therefore, DeFi needs more time to make a mass adoption. Given the fact of how fast the DeFi market develops and grows, you will get lots of benefits if you enter the space right now – before more use cases appear. In fact, the global DeFi market is forecasted to reach $231.19 billion by 2030, with a CAGR of 42.5% between 2022 and 2030.
The 2022 year also made it possible for DeFi projects and products to grow thanks to NFT, Metaverse and blockchain popularity. Start using DeFi by downloading a digital wallet like Metamask on your browser, then buy some relevant tokens depending on the blockchain you are going to use and choose how you want to get started with DeFi.
Consider prices on the blockchain. For example, Ethereum fees are too high for most, so you can always choose faster and more affordable ledgers like Fantom, where fees are a fraction of a cent, and everything works just like with Ethereum. Buy some tokens native to your blockchain as the transaction fee, known as gas and play around on popular DeFi platforms to learn DeFi aspects.
Final Thoughts
The DeFi market is incredibly popular. Lots of projects have been welcomed to the market during the last few years. In addition, investors and market giants invest in DeFi projects, making the space even more popular.
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