We all know that the most on-trend topic today is Crypto, and half of the population holds the knowledge to invest in Cryptocurrency. But connected to the No.1 question today is “Will DeFi disrupt the existing Financial Markets?” Experts say the Answer is 100% “YES”.
But what is DeFi? And why Experts are so confident with this Commitment. All the topics are unfolded in this article.
DeFi stands for Decentralized Finance, it is more popular these days as the banking system of Cryptocurrency. We need information on how the traditional banking system works to differentiate the terms Decentralized finance and Centralized Finance.
Every time we deposit some amount in the Bank, though it could be a Fixed Deposit or any other scheme, the bank offers us some amount over it as Interest. Simultaneously, the bank gives the money to someone in the name of the loan with a higher interest rate. Throughout the process, we never get the idea that to whom the bank is passing on our money and what amount of money it is bringing up with that, all this information is kept away from us, and ultimately, we stay away from the profit.
DeFi transparently brings the exact system, with Decentralized Finance you can easily track When and Who has your money and most importantly How much of the Interest rate the particular person is giving you with the loan in return, without the interference of any Third-party institution.
The motto of this new form of the financial system is to develop a system of Finance that is completely based on Artificial Intelligence (AI) and open and available to everyone including those who don’t have bank accounts to assist them.
About 190 million of the adult population do not have a bank account, making India the second largest nation in terms of Unbanked Population. In this age People usually don’t trust the Banking system or some third-party interference and here it brings the major role of DeFi. Investing in DeFi projects like-
- Colony Lab: on Avalanche Blockchain.
- Aave: Decentralized finance Platform showing on Liquidity Protocol.
In DeFi there are no Bank accounts to Bridge the gap but they hold access with SMART CONTRACT on the blockchain. Also, instead of any real-world asset like property or gold, we exchange, Crypto assets like Bitcoin, USD coin, etc. instead.
Points to be noted while investing:
Decentralized finance has brought up to us the passive and active ways to earn and invest through crypto assets. However, upside growth always has a second side of risks. One can also lose 100% of their money in any DeFi app or any other protocol available out there. So, applying the simple rule of thumb can mitigate the risks.
The Scalability of DeFi is low, which means its transaction speed is less and transaction cost is more. Notably, several sorts of freedom and transparency come here with responsibility. Everything here is Blockchain-Based, so if the user fails to understand certain points, then the user is responsible for the consequences
India is adopting this smart and new system of DeFi seriously, as per the global; DeFi adoption index report India Is ranked 6th and the top-ranking country in the highest DeFi adoption in the world in America, Vietnam, and Thailand.