Imagine a world where there are no banks and brokers. Could we still have a financial industry? According to the model of decentralized finance (DeFi), such an alternative reality has every reason to exist. The emerging sector promises to bring greater transparency, control, and yield to all financial instruments we use today for both customers and businesses.
For those at the forefront of finance and technology, this alternative has been looming for several years. Although the initial share of DeFi in the scale of the cryptocurrency market was relatively small, this sector has grown exponentially in 2021, attracting many traders and investors with its capabilities. In the recent Finscanner news digest, we have noted another DeFi burst of the total value growth.
New path with DeFi
At its core, DeFi is a blockchain-based, immutable and trustless ecosystem that verifies transactions without third-party intervention. The most recognizable platform for decentralized financial applications/services is predominantly Ethereum.
Decentralized finance encompasses all aspects of traditional financial services and transactions, including currency, loans, insurance, bonds, credit cards, stocks, futures, options, interest-bearing accounts. Any internet user can interact with the ecosystem and manage assets through peer-to-peer (P2P) and decentralized applications (dApps).
DeFi intends to:
- Expand access to financial instruments in countries with a weakly developed or unstable banking sector;
- Create a decentralized marketplace with the cost of services not overstated by the centralized authorities or intermediaries;
- Provide passive income from cryptocurrency assets;
- Significantly reduce commission fees for transfers, loans, deposits.
How is it being used?
DeFi is moving toward establishing complex financial ecosystems that run based on rules; thus, eliminating the need for traditional institutions. These rules can dictate action, automate transactions, and create immense efficiencies in the marketplace. For today, DeFi space offers the following range of products and services:
Decentralized exchanges (DEXs). DEXs facilitate peer-to-peer financial transactions and let users retain control over their money.
E-wallets. Wallets operate independently of the largest crypto exchanges, giving * investors and traders access to cryptocurrency and blockchain-based applications. Learn more about different types of wallets here.
Yield farming. The process involves lending cryptocurrency. In return, lenders get interest and sometimes fees.
Non-fungible tokens (NFTs). NFTs create digital assets out of typically non-tradable assets, making them unique and verified. You can learn more here.
Flash loans. These are fast uncollateralized loans enforced by smart contracts. One probably can draw the same analogy with decentralized arbitrage.
Most centralized financial instruments and technologies develop slowly over time due to all sorts of regulatory requirements. On the other hand, decentralized applications exist outside of these rules, leading to tech benefits.
Prepping for DeFi
Once you learn the DeFi basics, you will require a cryptocurrency wallet installed. Ideally, it should support Ethereum and can also connect to various DeFi protocols.
Let’s say you would like to try Eidoo wallet:
- Find Eidoo-related service at Finscanner marketplace. See the profile here.
- Click on the “Apply” button.
- Download the official Eidoo App on your device.
- Click on “Create a new Wallet” to create a new address and follow the instructions.
After that, you can explore DeFi space however you like. Most likely, you will start from Decentralized Exchanges (DEXs). Here are some of the exchanges you can find on our marketplace:
Uniswap — an open-source decentralized exchange protocol built on the Ethereum blockchain and operated by smart contracts. The popularity of the Uniswap decentralized exchange is breaking records as it ranks first in the Ethereum (ETH) network. Full decentralization, anonymity, availability of a large number of coins.
PancakeSwap — a decentralized cryptocurrency exchange powered by the Binance blockchain. The exchange was founded in 2020 and has already gained great popularity in DeFi. Today, its daily turnover is over $ 800 million.
Find more cryptocurrency exchanges, wallets, DeFi projects, and other crypto-related products at the Finscanner marketplace! Feel free to reach out to us today and explore all crypto opportunities!
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