In a bid to minimize if not eliminate the interference of middlemen like traditional banks, trade platforms and brokerages, DeFi was birthed by the creative humans of this world to take power from a set of people- making sure that individuals and institutions can now more easily participate in the financial ecosystem by leveraging tech solutions like blockchain and its attendant smart contracts.
It will interest you to know that although DeFi is officially really just a few years old, it has massively disrupted what we have always been accustomed to by innovating new ways of engaging in financial transactions from the ground up.
The niche currently boasts of emerging innovations in the payment service sector, credit facility niche, viable digital trade platforms, creation of fiat pegged digital coins like the USDT and USDC.
Why Investors Are Testing the DeFi Space
Over the shortest time, DeFi protocols like Yearn.Finance have been rewarding their users with as high as 11.4% annual interest rate. If you compare this rate to the rates offered by traditional banks, you have a hint to one of the reasons behind the DeFi rave.
DeFi’s innovation enabling facilitation is another reason for the rave going on about the sector, coupled with how relatively slow the traditional banking system is when it comes to innovating new ways to do things.
DeFi promises its users lower barriers of entry and exit, and much more inclusive participation in the financial ecosystem. Through DeFi, it has become easier to participate in the capital markets as private individuals are now able to bank without banks. The one-time richest man in the world, Bill Gates, notes:
“Banking is necessary; banks are not.” Nobody has taken this more to heart than the legacy banking system.
Although popularly known for running on the Ethereum blockchain, DeFi products are now looking to Polkadot as Ethereum continues to battle with the challenges of slow on chain actions on the Ethereum following the rise of gas fees.
This is not to say that the DeFi Sector is not fraught with its own downsides like many innovations. The DeFi sector has counted significant “high profile exploitations” Nevertheless, DeFi developers have refused to back down, they have their feet on the gas and it is becoming clear that DeFi is the future of banks as we know them.
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