The biggest change in the world of money has been spearheaded by Decentralized Finance (DeFi). The barriers in the traditional financial system have been well-documented as it has led to a lot of inequalities and has not been resistant to an economic crisis.
DeFi development services offer a profitable business model with plenty of benefits available for all the stakeholders. It promotes global access, maintains a high level of transparency, and processes transactions quickly at a low cost. The unbanked sections of the population will benefit a lot from DeFi.
What Are the Current Problems in the Traditional Financial World?
- Centralized authorities like government agencies and banks have too much power and influence in taking important monetary and fiscal decisions.
- Users are forced to pledge their assets and funds to them for earning regular returns.
- The various economic problems like unemployment, inflation, poverty, inequality in income and wealth distribution, and scarcity of resources have created a lot of issues for all the countries in the world.
What is Decentralized Finance (DeFi)?
It involves the establishment of financial applications on top of existing blockchain networks like Ethereum and TRON. They work based on DApps, smart contracts, peer to peer networks, and other inbuilt protocols. The main features of DeFi are it is trustless, completely permissionless, highly transparent, is resistant to transaction censorship, is fully decentralized, is free from the role of intermediaries, and facilitates the easy programmability of assets.
A single point of failure is not possible in a DeFi development solution as it does not depend on a single server and its nodes are distributed throughout the world. It is also very interoperable and two or more applications can easily interact and work together efficiently.
The Different Applications of DeFi Development
- It can help in the global transfer of funds at a low cost such as remittances.
- Eligible borrowers can get easy access to credit through crypto-backed loans without needing to possess a valid credit score. The crypto assets of the debtors can be used as collateral and loans can be obtained either in the leading fiat currencies or stablecoins.
- Blockchain technology can help in faster and more efficient banking services, especially in cases of clearance and settlement of funds.
- It can help in fraud detection and protection of investors’ rights by having checks and balances in place.
- The chance of errors can be reduced by having inbuilt compliance measures. All the transactions can be tracked on a real-time basis ensuring better financial reporting and a decrease in the time and cost involved in auditing financial statements.
- A digital identity system can be established to undertake KYC/AML verification of all the users to prevent chances of fraud. Different documents can be digitally signed and the data can be shared quickly.
The Current Trending DeFi Development Projects
- KingSwap, a liquidity pool, launched its debit card recently. Users need not pay any transaction fees on international payments and get 3% cashback on their deposits. They also get access to staking rewards and digital crypto-collectibles.
- Kava, a DeFi-based lending platform offers loans backed by stablecoins to borrowers. Ir has been financially supported by leading Cryptocurrency exchanges like Binance, OKEx, Huobi, and Kraken.
- Band protocol functions as a cross-chain oracle for sharing real-time data with smart contracts and DApps through APIs. It can be used across multiple blockchain networks effectively.
- Router protocol has raised $480,000 and is set to permit cross-chain liquidity farming soon. It is highly scalable, transparent, and interoperable along with the possession of smart order routing. The liquidity providers can stake their assets and earn $ROUTE, the governance token of the platform.
- BarnBridge that tokenizes the assets of the users by trading in derivatives has been listed now on Coinbase, one of the largest Cryptocurrency exchanges in the globe. Users can buy the BOND token on the platform. Investors use BarnBridge’s platform to safeguard against price changes in the market and hedging against different risks. They also have a yield farming program and a liquidity pool incentivization problem.
The Future in Store for DeFi Development Services
- At present, a whopping $23.71 billion have been locked in different DeFi applications and this amount will increase rapidly in the years to come.
- The blockchain-based fintech market is expected to rise to $6.7 billion by 2023 growing by 75% every year.
- Many industries like banking, wealth management, insurance, personal finance, digital payments, private equity, and venture capital could be impacted heavily by Decentralized finance.
- The usage of digital wallets will surpass cash soon.
- Peer to peer lending pioneered by platforms like Maker, Aave, and Compound is expected to reach $567.30 billion in 2026.
- In the future, users of banks may switch over to DeFi platforms powered by blockchain technology.
DeFi will play an important role in the future leading to positive transformation for the entire industry. The system will become more innovative and democratic in the years to come promoting equality without any chances of economic and social discrimination.