The financial revolution is here, and it's called Decentralized Finance (DeFi). DeFi is a new trend that offers users more control and functionality than traditional finance, while also reducing operational risks. It's no wonder that more and more people are joining the financial revolution by investing in DeFi. DeFi is more accessible than traditional finance.
As long as you have an Internet connection and cryptocurrency in your digital wallet, you can freely use DeFi. This means that regardless of your financial situation, you can borrow and lend cryptocurrency. DeFi takes advantage of a set of progressive and agile tools to give users control. CeFi's lending platforms act as a link between the traditional monetary system and the crypto asset market.
These services allow users to order fiat money directly (instead of stable coins linked to fiat currencies) and use their crypto holdings as collateral. Although CeFi and DeFi have different settlement processes and user behaviors, CeFi could learn a lot from DeFi stress tests. Like traditional trading platforms, DeFi platforms offer margin trading as an option to obtain funds from a decentralized financial platform (such as Aave, Compound, Venus) for traders to use as leverage to win. While the DeFi application code may not always be open source, its execution and bytecode must be publicly verified on a blockchain to be classified as non-custodial DeFi.
Some of the early advocates of the DeFi movement were MakerDAO, Origin Protocol, and Paradigm. DeFi strives to eliminate private agreements, late agreements, and centralization, which are fundamental barriers to CeFi's transparency. Unlike CeFi, DeFi allows customers to directly control their assets at any time (there's no need to wait for the bank to open). At the same time, the blockchain and its distributed network of miners manage the actual operation of the DeFi software.
On the other hand, the blockchain limits transaction performance, confirmation latency, and DeFi privacy. As a result, unlike CeFi, any DeFi user can observe and verify the orderly execution of DeFi state changes. Anonymous DeFi applications can work without an interface, forcing users to interact directly with the smart contract. Because of the uninterrupted nature of blockchains, most, if not all, DeFi markets are open 24 hours a day, seven days a week.
DeFi platforms offer crypto lending and lending solutions for crypto investors looking to earn passive income with their cryptocurrency or any other virtual digital asset. Certain CeFi markets, such as foreign exchange exchanges, which have used a combination of the AMM model and human interaction, are well positioned to enter the DeFi market-making industry, while existing DeFi markets are not. In DeFi, a user can examine the precise rules that govern the operation of financial assets and assets. As well as providing more accessibility than traditional finance systems, this means that users can trust that their transactions will be executed in an orderly manner.
Furthermore, in extreme scenarios where traditional finance becomes prohibitively expensive for most users, DeFi offers an ideal substitute.