The blockchain industry started twelve years ago with the release of Bitcoin. That was a shock, a huge slap for the traditional financial system. However, from another angle, it was a Big Bang of a Decentralized finance universe.
Right after an industry or a trend appears, a series of breakthroughs are on the way. As an example, we can take a look at the traditional financial system that has been developing for centuries. During hundreds of years, the fiat system regularly experienced tons of breakouts. Swift launch in the 20th century is one of those.
We are lucky to have a possibility to observe the Blockchain sphere development. Let’s ask ourselves a question: “What is the next huge step forward for the blockchain industry after Bitcoin release?”. As I have worked a lot with blockchain projects since 2017 and I can see clearly new trends in crypto, I guess the answer is on the tip of my tongue - DeFi.
Besides that definition, there are two more - distributed finance or open finance.
Before discussing what it is, we'd better start with what caused DeFi to appear and why it goes forward at a great pace. New markets set modern needs and requirements that cannot be fulfilled with traditional financial systems.
Traditional finance is opaque and often experiences crises. Many are convinced that by gaining transparency society will have an efficient tool for prediction and avoiding any crisis in the future.
The main purpose of DeFi is to eliminate intermediaries such as regulators that burden the system and make processes more complicated. Achieving that goal means the arrangement of the main tools from the traditional system - lending, payments, trading and others.
Speaking in other words, DeFi will help the crypto market to become more and more familiar to the end-customer that got used to traditional finance but without one huge disadvantage - intermediary regulations.
A reasonable question might cross your mind after reading all the said above - “Why do we need a mirror of traditional finance?”.
If we dive deeper, we can see significant new features. I’m talking about the fund pool for fast exchange. A series of smart-contract on the blockchain on what DeFi is built allows people to benefit from the transparency and license-free features like best rate transactions through the aggregation.
In a few words, DeFi consists of crypto assets, smart-contracts, and protocols. All these items might be mixed in any kind of combination for fulfilling any purpose a user or DeFi project developer defines for themselves.
As DeFi is license-free, any user with enough crypto assets can delve into DeFi. As an example, if you have ETH you can put a deposit on DeFi project and earn interest income. It’s originally done through the chain with no intermediary barrier. It’s free, fast, and convenient.
Users familiar with the crypto market and industry, in particular, can already use loans, transact assets, and commit payments. Of course, for those who had never had a crypto wallet, there is an obvious threshold. You need to be experienced for assets managing.
The difficulty of using DeFi projects gradually decreases as more and more projects simplify operating and create user experience to be more convenient and easy for a wider audience.
You can easily find Loans, DEX, financial derivatives under DeFi packages. Approximately 688 million USD in ETH and BTC are locked in DeFi projects.
We can't see the DeFi horizon clearly right now. It is certain now that DeFi will conquer a significant place under the crypto sun because it truly meets market needs and demand. So far, there have been two shocks - the first one is Bitcoin and the second one is DeFi. Stepping aside from its small market shares, DeFi is charged with the potential to become the next breakthrough combining crypto and traditional financial systems in one.
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