Remember when we talked about how DeFi is the future of finance? This piece is written to prove to you why traditional banks are going to be a thing of the past.
When we talk about the traditional financial system, we know we are heading towards an organisation managed by employees, secretive about its functioning, bound by its geographical institutions with a certain set of complicated procedures to be followed.
While Bitcoin revolutionised money, it was Ethereum that introduced us to the wonders of modern banking. From innovativeness to interoperability, borderlessness to transparency, everything that the traditional banking system lacked, came into existence! The working of these apps is truly permissionless. Meaning? Anybody, anywhere, with an internet connection can access DeFi(s), unlike gatekeepers of the geographically bound financial institutions. Not understanding the interface of the app you’re working with? Dapps allow third party interface or build one for yourself to make the experience as user friendly as possible One of the fastest growing sectors in crypto, DeFi holds over $600 million worth of user money, as of January 2020.
Dapps have been blessed with interoperability. Have you tried building a Lego model? DeFi applications work in a similar manner. These applications are made combining other DeFi products, meaning, stablecoins, decentralized exchanges, and prediction markets can be combined to form entirely new products. Not just this, DeFi defies all geographical boundaries (except the local regulations of course) and is global from the day it comes to existence, with the same kind of services provided worldwide. We know we can trust decentralised finance because all such applications show us what transparency is. With the blockchain open to editing by anyone and everyone, the user gets an opportunity to understand or even identify bugs. Privacy issues you ask? The pseudonymous nature of the transaction leaves no traces of your real-life identity!
It is still early days for Dapps, yet it has managed to establish a few promising apps, each one serving a different purpose. MakerDAO serves as a Decentralised Reserve Bank that pegs each stablecoin (called DAI) to US Dollar and is backed by Crypto as collateral, whereas, Compound is a blockchain based borrowing and lending dapp that allows the users to lend their crypto and earn interest on the same. With Uniwasp running an automated cryptocurrency exchange and Synthetix giving rise to synthetic versions of assets, Dapps have a bright future ahead of them.
What is happening is unimaginable, almost magical. We have reached an open financial system and we cannot fathom what innovations are on their way when the power to provide financial services is democratized to anyone who can code!
Read more about what DeFi at: https://thestorylane.com/decentralisation-of-finance-introduction/