This is how DeFi Going to change the finance world (Finance 2.0)

in Project HOPE2 months ago

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DeFi is the Finance 2.0 and you can say that it is advance level of finance. The main aim behind the DeFi is Decentralization and censorship free finance services. Here we going to learn some basic things about DeFi and it is important for each and every crypto enthusiast to know.

Before you have changed your habit of loving fiat currency and now You must switch your financial activities to DeFi. There is still many people not understanding the crypto currency but slowly slowly people will understand it and take the benefits from DeFi as well.

For them Crypto is step one and DeFi is step two. But our time is now to know in details about DeFi and use it.

Well hive mechanism is similar to DeFi. In hive you can powerup your hive and (Like bank FD) you will earn money by many ways by that powered up fund. Such as upvoting and delegating you are getting decent curation reward and daily income. And yes there is leasing platform is also available that you need to check.



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Before understanding the Decentrlized finance first we have to learn about Traditional finance and decentralized finance. For example "X" person has a extra money and he want to earn interest on that extra money. For that "x" can deposi their exra money in the bank as a fix deposit or under any scheme. So bank will give income to "x" month or yearly (according to scheme).

Other side, "y" person want to start business but he does not have enough money to start that business. So he can go to the bank. So what "y" will do ? He mortgage gold or property to get loan from the bank. So The bank taking money from "x" by giving lower interest to him. And giving that money to "y" and take high interest from "y".

So now you can got it that how traditional finance and centralized finance works. Now just think that this is possible without bank ? May be not because person can't trust person directly.

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So in above examples we have learned about Centralized/Traditional finance and there bank work as a trusted partner. And in DeFi, smart contracts work as a trusted partner. Unlike banks, smart contracts are hundred percent transperant because it is built on blockchain.

And it is follow simple rules that coded in smart contarcts. So if anyone want to invest? He/she first check the code and verify it that smart contact is correct or not.

And here you have to learn second thing and that is what things use here? So instead of property and gold, here you use crypto assets. So these two things are replaced here. One is a borrower's property and second thing is trusted partner.

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Now take a example that the person that name is "x" has a exra crypto assets and he want to earn extra crypto from that extra crypto assets. So now "x" can deposit their crypto assets in DeFi smart contracts. And in return he wil earn monthly or yearly return on that extra crypto assets.

Same as above other side, "y" want urgent money and he has some "hive coin" and he does not want to sell their hive coins because he know hive is very important for him. So in this case he can mortgage their hive in DeFi smart contracts to take a loan.

And When the time comes "y" can take their hive coins back by giving their loan amount. The most amazing thing is you can plug your exisiting DeFi protocol with each other which is not possible in centralized finance or very difficult.

  • Difference between DeFi and centralized finance : In centralized finance, KYC is compulsary thing but in DeFi it is not and you can use any service without KYC. Other thing is Centralized finance is country limited but DeFi is a global . Centralized finance means censorship and he is the owner here but in DeFi no one can censor. another most important thing is centralized finance is not a transpernat and you can't track your money. But in DeFi, You can track your money that where it is transferred and where they are using it.

  • conclusion

    So this is the main concept of DeFi that your money, your authority. DeFi attracting many users and it is most trending and hot topic now because it has lots of use cases in finance industry. If you really enjoyed this post please share this post on social media. Have a good day.

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    Images taken from Pixabay.com , Edited by me ....


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    I read about Defi and was trying to understand it. Glad I found your post and came to know the details and concept of DEFI. This article is helpful as you gave example with centralized and decentralized finance.

    Thanks...

    Hi @priyanarc good evening, thank you for reading my post. i have tried to cover basic informations with example. i am glad that you liked it.

    good article, is not only in the financial area but also to have a more transparent management in public entities

    ya well said . thanks for the comment ♥