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WHAT IS DECENTRALISED FINANCE?

DEFI, which stands for Decentralised Finance, is not a strange concept or terminology in the Blockchain space. And with WEB3 parading its value and essence all over the globe, DEFI is definitely sure to be a household name in the world at large.

DEFI is a clearer and more transparent financial system made up of financial products and services which come with more accessibility options for people to take advantage of, without having to incline to centralized members or processes to facilitate financial operations at any given level. All of these services are aided via the provision of decentralized applications(dapps) which sit comfortably on the Ethereum Blockchain.

BRIEF HISTORY

Most researchers will argue that DEFI came into existence between 2015 – 2017. This range is always taken due to some sort of belief that DEFI was a concept or by-product of the overall build of Ethereum which was launched by Russian programmer Vitalik Buterin in the year 2015. Some other factions are of the opinion that the DeFi concept came into play when Bitcoin was introduced to the world. This was as far back as 2009. According to cointelegraph, “no exact date is put out for the inception of the DeFi sector other than Bitcoin’s launch in 2009”. But we do know that in 2017, cryptocurrency was given a breath of life through the structural alignment with DeFi. This paved the way for Blockchain developers to tap effortlessly into the underlying potential hidden within the framework of DeFi thereby enhancing the creation of financial systems that we now enjoy today. According to DeFi pulse, DeFi value was below 1 billion dollars at the earlier stages of adoption. As of today, the number lists an approximate value of 27 billion dollars.

DeFi Of Today

DeFi got rapid recognition in 2020 and this was due to certain factors that existed. We will discuss just two of those factors.

DeFi lending protocols : Lending protocols allow users to lend and borrow assets within the space. Of Course everything here works on the traditional principles of lending and borrowing. However a few changes might be present. Being that the lender is allowed to overcollateralize due to the fact that some assets gotten from the borrower might dip. The second change is that DeFi landing protocols completely eliminate a third party.

Yield Farming : Yield Farming is simple! The concept is amazing and that is why I consider it an important factor to the recognition of DeFi as a whole. In yield Farming, users (farmers) drop or deposit their crypto assets(seeds) in a decentralized application(soil). This process helps them yield rewards and provide liquidity.

DeFi today has made provision for the transparency and accessibility we see currently in Blockchain. It acts as a self-operating banking tool which appeals to tons of users who trade in the financial space. DeFi has obviously become an alternative to the opaque banking structures that existed in the past couple of years and somehow it’s ubiquity is unrivaled in the finance world.

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Defi is everywhere! Especially within the third world wide web commonly referred to as WEB3. Protocols have emerged, money moved effortlessly within the crypto space; this is not to discredit the traditional financial systems but to bring to light, the limitless possibilities of what DeFi brings and how it impacts the WEB3 generally. The reason for this Ubiquity is partly traced down to how emotionally attached people are to their finances and wealth. With the added advantage of dapps being on the Ethereum chain, DeFi receives better credence and embrace from people who tow the blockchain path.

DeFi is an apple in the mouth. You can savor the taste of a hitch free finance system and the numerous possibilities it holds in the coming years to come. With WEB3 as a grand platform, DeFi opens us up to a fully participatory man-money relationship which gives us the ability to align perfectly with wealth creation opportunities that the blockchain might prepare for us. The third world internet (WEB3) is very huge. DeFi is one major concept like many others aimed at giving definition to a somewhat misunderstood WEB 3.