Inspired by blockchain technology, DeFi refers to an abbreviation for Decentralized Finance. It acts as an umbrella term for numerous financial applications that aim at removing financial intermediaries. Unlike other financial systems, DeFi enables the excessive use of blockchain technology ranging from simple value transfer to most complex financial uses. Resisting the middlemen activity from transactions is one of the primary advantages of Defi.
Decentralized finance can be declared as the buzzword for 2020, because of numerous reasons. Yet the three major reasons that have led numerous institutional and government buy-in for DeFi platforms are:
- The dramatic growth of the blockchain network
- The symbiotic awareness of the public for blockchain technology.
- The increase in the need for new financial systems.
Hundreds of DeFi platforms have already emerged to fill up the digital finance vacuum, and have also led the Consensus team to declare 2020 as the year of DeFi.
Some renowned new emerging services like Cred, work as the largest decentralized finance platform and the gap between the default expectations from the finance industry and new opportunities that DeFi provides.
All together we have a clear picture of DeFi being one of the primary representations of blockchain technology, which is bringing a noticeable change in the existing financial framework.
Below listed are some huge changes that analysts have noticed throughout this year emerging in sync with new DeFi methods.
- Re-structuring international payment process →
The new verification mechanisms, payment gateways and transaction paths introduced by DeFi have eradicated various SWIFT-like protocols that served as major international transactions paths for banks.
New DeFi containing networks imply blockchain as their base to overcome the shortcomings of the fiat currency transaction systems.
Also, the permissionless processes for international banking fill the gap to a new financial realm, where the owners of financial processes can carry out transactions, more confidently, securely, and with minimal verifications. This brings into picture another comprehensive trend that will be visible in the DeFi space soon.
- Zero trust, and Permissionless Systems →
DeFi brings in the biggest change i.e. the emergence of Auto transaction verification systems. These will be game-changers as earlier, third parties like PayPal, Stripe and others had verification processes that took days, and required multifactor authentication.
Contrary to these, future systems are predicted to be so streamlined that they will be registered with stakeholders of elaborated digital transactions. With the rise of permissionless transaction technologies, various new types of businesses are now possible.
- Lower Costs for Business Execution →
Another beneficial aspect of these changes is that they are going to cut off numerous transaction costs.
For example companies like SWIFT have started filling the gaps and are now offering low-cost payment methods.
As DeFi is already covering a wide range of areas, some of its most promising sectors involve credit and lending.
By spearheading in DeFi, Cred offers lower interest rates and provides other new opportunities to users, on its platform that represents how new blockchain efficiencies are covered.
- Rapid Networks with Layer 2 Payment Systems →
New layer 2 payment solutions such as the Lightning Network are now helping establish faster payment networks.
From this year and beyond, DeFi is definite to become way beyond just a buzzword. The present-day financial system desperately needs a kind of service that improves and maximizes its process and potential for the new digital era.
The inclusive, streamlined, and secure processes offered by the latest DeFi platforms are the reason that the latest blockchain platforms are attracting so much attention. In the coming years, DeFi is definite to become a life-changing evolution in the world of technology that will transform our financial systems.
This serves as good news for blockchain platforms, financial institutions, and the customers as it will reap high benefits of new and better processes. Therefore to avail these high benefit yielding opportunities you can contact our DeFi Developers. W3villa being a DeFi development company offers high-end DeFi development services to enhance and level up your financial platform to another level. For more information regarding DeFi related services, you can contact our developers round the clock.