DeFi (abbreviation for Decentralized Finance) is a very hot topic in the world of Blockchain and Cryptocurrencies. The reason is simple: it makes possible the use of disintermediated financial services. No person or company in which to place trust (and, above all, funds).

This is made possible by smart contracts: lines of immutable and unstoppable code that continues to process the information it receives at the input, performing actions according to its rules. These rules, in full Blockchain style, are completely transparent to everyone.

Are you wondering what services are available? Let's find out now!

Credit and Debt (Loan Provision)

One of the market needs in which DeFi has entered, as well as one of the first, is the request for liquidity against the constraint of a collateral. What does it mean?

Suppose I have 1 BTC, and I need liquidity. Obviously, the solution that will come to mind first is to sell Bitcoin. However, in doing so, I have numerous disadvantages.

First of all, I expose myself to the taxation on the sale. Secondly, I lose possession of my investment asset. Those who hold Cryptocurrencies usually do it because they believe in its future value, so selling them is the last thing they want to do. Here the second possibility arises: tie them to get a credit, in the form of the liquidity I am looking for. Once the loan was repaid, I returned my Coins back. In this way, I do not lose possession of my assets, nor do I pay excess capital gains tax on them.

Obviously, to make liquidity available, it will take an incentive towards those who provide it. For this reason, those who request the loan will be required to repay it with an interest, which will go into the pockets of the lender (the liquidity provider). This thing opens the doors to the other side of the coin too: the possibility of becoming a lender. In doing so, we make our immobilized liquidity yield by lending it, and obtaining an interest.

The beauty is that all this takes place in a decentralized way, so there are no further mark-ups on the commissions applied by intermediaries (who usually want to take a large slice) nor risk of bankruptcy of the intermediary company. There are platforms that allow you to accrue up to 8-10% per year of interest in the lender!

Decentralized Exchange

The DEX are not new, but still belong to the category of DeFi. The possibility of completing a purchase and sale transaction without an intermediary acting as a guarantor of trust is not at all underestimated. DEX are platforms that allow everyone to do it, by crossing supply and demand in an ungoverned platform. The most developed cross chain DEX is Efin at the moment, which should be used by the bank also acquired by the Litecoin and Tokenpay Foundation as the main exchange.

At the center, also in this case, there are smart contracts and shared liquidity protocols. They are certainly less performing platforms than their centralized counterparts, but they exhibit significant advantages, the first of which is the non-need to transfer funds out of their wallets.

In this way, he always controls it without exposing himself to the risk of the failure of the third party involved in the exchange: the intermediary.

Exchange of Decentralized Derivative Products

The creation of derivative products without a central clearing house is much more complicated than the simple exchange: the problem of collateralization is added.

To deal with it, it is first of all necessary to tokenise a synthetic product, such as a leveraged contract or a SHORT, linking it to a demonstrable countervalue. Finally, this product is made available to the market.

Through the incentive of Staking, users are encouraged to bind funds, making them the necessary collateral.

In this way, through oracles that import prices and market values from outside the chain, it is even possible to tokenize other assets, such as stocks and raw materials.

DeFi: The future for Blockchain and Cryptocurrencies?

I imagine that the speech will have intrigued you, therefore I encourage you to deepen the various categories that you can find both by looking for DeFi on Publish0x and online.

We have always tried to use the Blockchain in the most disparate ways, the majority of which are meaningless. Now it has become clear what its purpose is: value management.