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The recognized fathers of blockchain Stuart Haber and Scott Stornetta
Until 2015, a genius programmer named Vitalik Buterin created Ethereum ETH, and the blockchain industry made key changes. Implemented a programming language for the blockchain industry, allowing programming on the blockchain, the so-called smart contract, which allows projects and individuals to issue tokens and raise funds, namely ICO and STO, which give blockchain Brings more projects and possibilities. This breakout success saw the crypto market capitalize soar to $815 billion in 2018.
However, due to the lack of standardized rules, liars, fools, and lunatics were all displayed in the cryptocurrency market, and governments around the world began to strengthen supervision. Since then, the market value of most ICO projects has dropped by 90%.
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What is DEFI?
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The Second Breakthrough in Blockchain History
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DEFI is making history in the blockchain industry
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DEFI is based on traditional finance but surpasses it
Like traditional finance, DeFi allows everyone to invest their funds in different assets according to their needs. Provide users with new products and services through various assets, contracts and agreements. Traditional finance has earned the trust of many through intermediaries and their services. It can meet many needs and help people manage their own finances. DeFi is building a world parallel to traditional finance. For example, Compound, Dharma, Maker, etc. are all providing loan services for encrypted currency assets, which can be considered as encrypted versions of traditional banks. Projects such as Uniswap, Kyber, and Bancor offer asset swap services similar to Nasdaq, NYSE, and other exchanges in traditional finance.
Intermediaries in the traditional financial sector, such as commercial banks, investment banks, stockbrokers, collective investment funds, and stock exchanges. Although market efficiency has been improved, better resource allocation has been achieved. But at the same time, the existence of intermediaries also creates problems such as opacity, which often leads to excessive debt or hyperinflation. In the current financial structure dominated by intermediaries, economic crises and inflation are happening, and history seems to be repeating itself.
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DEFI is building a new type of financial relationship
DeFi is not only imitating traditional finance, but also showing new characteristics. It offers instant transactions through pools, which can take 3 to 5 days for traditional intermediaries to clear. The interest rate of DeFi can also be adjusted in real time, while there is no grace period for traditional lending. This greatly speeds up the liquidity of assets.
From the point of view of lending, the current lending requires an intermediary guarantee to borrow money. But on DEFI, since all borrowing and settlement processes are regulated by smart contracts, there is no need to worry about default without intermediaries. At the same time, due to the omission of intermediaries, lenders can obtain higher income and borrowers Better interest rates can be obtained.
At present, people can realize loans, transactions and payments through DeFi, but for most ordinary users who have no experience in using encrypted wallets, DeFi has a certain threshold, and it requires users to have certain ability and experience in asset management. However, as more and more DeFi projects simplify operations and become easier to use, once people use DeFi products, the difficulty of using them will gradually decrease. Once the habit is formed, more and more people will enter DEFI.
