DeFi: The Future of Finance
Innovation is the precursor to progress and evolution. Decentralized Finance (DeFi) is the next form of financial innovation. The financial landscape is ripe for disruption, and we’re witnessing the reinvention of finance in real-time.
What is DeFi?
DeFi is an exciting, new trend changing the way we interact with money. It allows users to exchange value free from centralized intermediaries like governments or banks and provides individuals more control of their finances.
Centralized institutions are losing people’s trust in their usage of private data and the broader inclusion of populations. According to a McKinsey survey, 71% of internet customers would abandon a company that shared personal data without their consent.
To develop systems discouraging moral anarchy and rampant elitism, decentralized apps (d’Apps) on DeFi use smart contracts to program shared agreements between transacting parties. By implementing these laws into their tokens or blockchain, platforms create services focusing on proper data governance without intermediaries.
How DeFi is proving to be disruptive
In 2020, the total value locked (TVL) for DeFi was barely $1 billion — forward a year later, and the TVL has grown to $80 billion. This growth of DeFi is exponential.
However, user growth as a metric is more important to measure than TVL. Why? Because it symbolizes adoption and engagement.
With over $50 billion worth of crypto assets currently locked in d’Apps and millions using them for traditional financial services such as borrowing or lending, it’s only a matter of time before DeFi is more widely accepted.
What are DeFi’s use cases?
DeFi is a movement providing financial services to the unbanked. There’s various application for DeFi’s technology in different ecosystems, and it’s helping those without access or means receive financial services.
Some of the most popular DeFi use cases include:
Also known as liquidity mining, yield farming is defined as the process in which DeFi users can earn rewards because of staking their capital.
By lending their cryptocurrency, liquidity miners earn interests, rewards, or an annual interest percentage (APY) if the token or coin they’ve provided liquidity for appreciates.
Yield farming has become so popular for several reasons, including the opportunity to save money and earn passive income.
An example of a DeFi platform offering Yield Farming is Compound.
The idea of DeFi insurance is not too different from how traditional policies work. It protects individuals or institutions against unfortunate catastrophes with the intention the coverage will help limit their financial losses in such circumstances.
The significant difference being, instead of using traditional brokers and insurers, decentralized insurance companies use publicly available and fully transparent smart contracts to allow a pool of people to spread their risk in exchange for an insurance premium.
Examples of DeFi insurance platforms are Nexus Mutual and Steady State.
The future of finance is DeFi
Through lending platforms, synthetics, staking models, or exchanges, users are increasingly fully conscious of the vast potential of DeFi platforms.
Despite being in its infancy, DeFi as a transformative technology is real and will continue to grow. The long-term future of DeFi is encouraging, and though there remain lingering issues requiring improvement, the technology is on the right track for sustained success.
The future of DeFi is bright. As projects develop solutions to deliver lower fees and quicker transactions with robust platforms worldwide, we’ll continue to see a positive narrative for DeFi and mass adoption.
POP! is a platform that allows 2 projects to objectively display mutual trust and commitment to each other, by locking their respective tokens together and creating a trustless Mutual Liquidity Pool (MLP). In addition, it grants POP! users the opportunity to provide single-sided liquidity, in the form of their favourite token, by matching them with another POP! user and adding their joint liquidity into the MLP.
Powered by Faculty Group, POP! aims to set a new golden standard with regards to partnerships, and how they are perceived in the digital asset ecosystem.