Imagine a world where you get to bank, store, and participate in the financial market relatively on your own terms? Great! That and more is what the DeFi (decentralized finance aka open or distributed finance) movement has come to achieve. DeFi is a disruptive blockchain innovation that seeks to renovate existing financial products (by using the technology of trust- blockchain-) and transforming same into transparent protocols that operate without the use of middlemen- our dear banks.
DeFi is a Blockchain Inspired FinTech Innovation
Blockchain (decentralized ledger technology) is the crux of Decentralized Finance. It allows several participant nodes (entities) access an immutable and transparent history of transactions. Essentially, this novel system is described “decentralized” as it is not under the absolute control of a sole entity like banks. This is significant because centralized intermediaries tend to stifle client’s direct control over their monies. In a lot of words, the ordinary bank customer is now put on the same advantage level as banks. It is at this point that I will like to point out that DeFi is currently run on the Ethereum Blockchain seeing as the system allows for open financial transactions such as lending, trading, derivatives, and prediction markets etc. This model serves as an enabler for customers to act directly as the exchanges (trade platforms), lenders and also liquidity providers (market maker).
Can We Hope For A Financial Inclusion for All?
It has been said that DeFi is more or less financial inclusion for all (at least for those with access to the World Wide Web), as participants get to contribute to directly funding the system and also stabilizing the system that they have collectively created for themselves. This 2 year old blockchain creation advances a fintech substitute to conventional modes of saving, banking, traditional loans, trading procedures and even insurance.