Decentralized Finance, most widely known as DeFi for short, is one of the hottest topics in the crypto space.
There is a high possibility you already know what Defi is and its uses. Briefly the idea behind it is to take banks and governments and let individuals control their finances.
In this guide, we will cover the currently major functions of DeFi.
Major Categories of DeFi
Although stablecoins are not really a DeFi function, they have an important role in making DeFi applications more accessible to every individual by having a stable store of value, since prices of cryptocurrencies are extremely volatile.
In addition there are Decentralized stablecoinσ. The most widely known of these is DAI, with which all users of Publish0x are familiar since it is the most tipped crypto on the platform.
Lending and Borrowing
If cryptocurrency space is decentralized money, then DeFi is a decentralized finance for borrowing and lending, while It's still early days for DeFi.
If you possess crypto and want to convert them into one another, the most common solution is to use exchanges. Most of them are centralized, which means that you don't really control your cryptos. You are putting your assets at high risk since if the centralized exchange gets hacked they won't repay you back.
That's the main reason you should always keep your cryptos in your wallet.
Read more: How to Choose the Best Cryptocurrency Wallet
We hope the issues of centralized exchanges, will be solved by the decentralized exchanges(DEXs).
Without the need to store any crypto you can exchange without any risk in a DEX. These exchanges are in the early stage of adoption and don’t have in the moment big trading volumes but I believe that its famous will rise soon!
A derivative is an asset that represents something in the real world. Such assets on the blockchain are allowing users to access real-world markets while at the same time provides the security of a decentralized network.
DeFi platforms are starting to build decentralized derivatives markets.
As DeFi technology constantly evolves, more creative financial functions will emerge.
Having a DeFi lottery there are numerous ways of connecting this function into another DeFi application and creating something more useful and of greater value.
A key function of crypto is to allow decentralized and trustless value transfer between two individuals. With the rise up of DeFi, many creative payment methods are being in experimental state.
While it is common to possess insurance on cars, homes, heallth and many other aspects, is it possible to have decentralized insurance in the crypto space?
All the cryptos locked in smart contracts are vulnerable to exploits and hacks.
The future of DeFi
Decentralized Finance (DeFi) has several benefits compared to traditional financial services.
Although it is tiny in comparison to traditional finance, it has picked up pace rapidly and has huge growth margins. We except more and more projects and DeFi uses, functions, and apps so we eventually reach a decentralized financial reality.
Decentralized financial system will bring hype in market as ICO did in 2017. So keep your eyes on DeFi projects.
I would like to know if you are using any DeFi function and which one. You can comment below and don’t forget to subscribe!