What Is DeFi
DeFi (Decentralised finance) refers to financial instruments that don’t rely on intermediaries such as brokerages, exchanges, or banks. This is achieved by using smart contracts on a blockchain which provides full transparency and decentralisation.
The goal of DeFi is to provide users with more transparency, security and liquidity than what’s currently available in the traditional financial system.DeFi works by connecting borrowers and lenders who have a shared interest in participating in a particular market. The loans are then managed by smart contracts, which are essentially contracts written in code that run on the blockchain. These smart contracts allow the loans to be settled automatically after the terms of the contract have been met.
The process is simple: Borrowers submit applications for credit, which are reviewed by lenders who decide whether or not they want to approve them as well as how much money they would be willing to lend. Once approved, borrowers receive funds from lenders and use it for whatever purpose they see fit (paying off debts, buying goods). If there are any remaining funds after all requirements have been met, then those funds will go back into the pool for future use!
In other words, DeFi is an alternative to traditional finance. Instead of purchasing and selling stocks, bonds, or derivatives like futures contracts, you can buy digital assets with DeFi. It’s a way to get exposure to different digital assets.
Benefits Of DeFi Over Traditional Finance
DeFi has a lot of benefits that traditional finance doesn’t. The first is that it’s less expensive than traditional banking: DeFi platforms are almost always cheaper than banks because they’re often run by individuals or small teams who don’t have the overhead costs of larger companies.
Another benefit is that there are no fees associated with DeFi investing platforms; rather, investors are paid dividends from the profits made by the companies they invested in. This means that people who put their money in DeFi apps will always get paid and this makes them much more resilient than traditional finance options.
Some more of the benefits of DeFi over traditional finance include:
-You can access your funds directly from the platform without having to sell your assets.
-It’s more cost-effective because you don’t have to pay fees and commissions when you sell your assets.
-You have more control over your money because you don’t have to trust someone else with it.
-DeFi can be used by non-specialists to invest in the market.
-You can trade as much as you want and where you want
-It’s not regulated by government agencies
Real World Use Cases Of DeFi
DeFi is already being used by people across the world due to its ease in applying for loans in comparison to banks.
One of the most common uses that DeFi is being used for is to make large purchases such as buying a house. You can use DeFi to put down a small down payment on your home, making it easier to buy without having to take out a large loan or pay interest on your credit card.
DeFi also helps you make better investment decisions by giving you access to more information about the markets and financial products available. This will help you make better decisions about which investments are right for you, at what price point, and how much risk you’re willing to take.
Another popular use case is investing in stocks or bonds when those aren’t available on an exchange. DeFi lets investors buy more shares or bonds directly from the seller, rather than through a broker or fund manager. This means that investors don’t have to pay as much in fees, and they can get access to rare deals that other investors may not have heard about yet!
There are lots of real world use cases for DeFi. Here are a few more:
-Using DeFi to pay your bills
-Using DeFi to pay your rent or mortgage
-Using DeFi to pay for your groceries, gas, and other necessities
-Using DeFi to pay off debt
-Using DeFi to send money quickly with low fees.