- Posted by: VuTrades
- Category: Blog
The traditional finance world is plagued with issues that have made more people embrace the decentralized finance realm. A crucial factor is inflation, which forces the funds kept in bank accounts to lose value. Centralization comes with other issues like bureaucracy, abrupt changes of rules, the middleman factor, and so on. With the coming of decentralization, several of these issues are handled effortlessly. It is common to hear people ask questions like, ‘What is DeFi?’ ‘How does it change the traditional finance world and how to stand out by being a DeFi project?’
Well, we are about to find out, because thanks to DeFi, users can now effortlessly participate in borrowing and lending markets, as well as earn interest on the cryptocurrency they hold.
DeFi Solutions To Global Economy And Crypto World
DeFi has reached a $128 billion market cap, which is not surprising because of the amazing solutions that it offers in the finance world…
- In a centralized organization, the firm has access to the funds that the user deposited. The organization such as a bank can decide to freeze the user account without notice, force the user to close their account or carry out other actions that are not in the interest of the user. This is not the case with a decentralized platform because there is no single authority that can decide to shut your account without notice.
- Centralization gives the government the authority to print as much money as it wants, without thinking of the repercussions. When there is excess supply of money, inflation becomes a thing. In a decentralized finance ecosystem, the number of DeFi coins minted or created is pegged at an amount. Sometimes, these DeFi universes purchase their DeFi coins from the open market and burn them, in a bid to reduce the supply of their crypto.
- Centralization offers a government the authority to devalue their currency, which may translate to hyperinflation. Hyperinflation is one of the worst economic scenarios that can occur, as it wipes out savings and creates several social problems. DeFi pokes holes into this issue.
DeFi is here to stay because it is altering the way people have access to financial instruments like lending, borrowing, earning interest, while their holdings are safely backed by other crypto assets. As a result, we will see even more DeFi projects spring in a bid to alter the conventional banking sector and the use of finance.