What is the future of Decentralized Finance?
The decentralized finance sector currently represents only 0.1% of its maximum potential, and its significant growth is inevitable. As a result of this, in the next 5-10 years, DeFi is most likely to grow about 90 times larger than it's capacity and potentials today or even more.
What is Decentralized Finance?
DeFi, or decentralized finance, is an overarching phrase for financial services operating on public blockchains. In DeFi, you can do almost everything traditional banks support but faster.
This includes earning interest, borrowing, lending, buying insurance, trading derivatives, trading assets, and more. It doesn’t require paperwork or a third party on the blockchain. Moreover, DeFi is global, peer-to-peer, pseudonymous, and open to anyone.
Why are people using DeFi?
DeFi and decentralized exchanges (DEXs) around the world allow anyone easier access to credit, lending, and borrowing activities. This technology changes the landscape of the conventional financial systems.
Users make trades and move their assets wherever they want without waiting for bank transfers or paying standard bank fees. Although other crypto-specific fees, such as gas fees, may apply.
The major benefit of a DEX is that these exchanges don’t require users to deposit their money onto the exchange. Instead, users connect their blockchain wallets and trade directly from there.
In addition, price manipulation and false trading volume aren’t possible, as the money comes from users themselves. Hence, DeFi's core premise is that there is no centralized authority to dictate or control operations.
However, it’s an illusion that all activity on the blockchain is anonymous, for example, some decentralized exchanges block users based on IP address. Some of these DEXs also have know-your-customer (KYC) requirements in place.
