I think the rainy season is finally over. I'm not a rain hater. I'd like to dance in the rain but I prefer to be under the sun. Today, we still gonna talk about crypto shit. I hope you don't get bored :(. This time we're going to talk about DEFI. It stands for Decentralized Finance. If it comes to finance, you know what we're gonna talk about. Yes, money baby.
The system on DEFI removes the control banks and institutions have on money, financial products, and financial services like traditional banks we save our money at. Traditional banks have this financial system that is full of third parties who facilitate money movement between parties, with each one charging fees for using their services. I'm not saying there's no fee at all in DEFI, but it is much cheaper than the traditional banks which makes everyone happy.
Centralized Finance as we know as Bank
In DEFI you can loan money just like in click! You get the money right away. As long as you get an internet connection for sure duhh! Let's discuss first about centralized finance as we know it as a bank. Say you want to buy a car but you don't have enough money. As we know, banks could give you some loans to get your dream car but they will check everything in your papers. Including how much money you earn every month/year. Because there is no way they give you a loan when your monthly earning is not even enough to pay them back of the loan you borrowed. They will give you time due to you pay the money back. You will give them a deposit such as a house, important papers etc. And if you end up can't pay the money back, they will take the deposit and it could even belong to them.
It is also not easy to get a loan from a bank. They will surely look up through all your financial history as if you ever had an issue with another or even the same bank that you can't pay the money back or even late not paying at due time. They will definitely consider you and might not give you anything which fairly sucks. They can't serve you 24 hours. They use humans to serve you and humans need rest so they usually only open for 5 days in a week for only 8 hours per day. So you have to pay more for the services! Super duper mega sucks. I get it because they have to pay for these employees, electricity and other shit so they charge us more. But if we do it with DEFI, everything is gonna be fast and easy. We all prefer simple things, am I right? Yoo, I'm always right.
Decentralized Finance or DEFI
Do you still remember the peer to peer thing? Yes, if you remember my previous article about blockchain and DAO you'll surely know what I'm talking about. But if you don't, maaan you better check my previous article first here is the link (Blockchain, DAO). The system on DEFI is peer-to-peer financial networks that use security protocols, connectivity, software, and hardware advancements. DEFI allows us to very easily get access to loans. The cool thing is you can do it anytime from anywhere as long as you have an internet connection, you can lend, trade, and borrow using software that records and verifies financial actions in distributed financial databases. It's all flexible. It is fast. No need to wait for long transfers to finish. No need asking for permission and the most thing we like, no expensive fees! Woohoo.
I'm kinda a mysterious person. Ohh you too? I gotchu. You don't need to provide your name, email address or any other personal thing. You can be anonymous and mysterious. DEFI don't give a fuck about those. You basically don't need to apply for anything or 'open' an account. You just get access just by creating a wallet. Simple things are all we need. It's a fair fair game. If your partner always be lying to you, DEFI WOULD never stab you behind your back. Jeez sorry I gotta chill. Transparency is all they can offer. Everyone involved can see the full set of transactions. Ain't nobody can't fuck things up.
How DEFI works?
Decentralized finance uses the blockchain technology that cryptocurrencies use. I've also written an article about blockchain. Please check it out because all these things are related. So blockchain is a distributed and secured database or ledger. In the blockchain, transactions are recorded in blocks and then verified/agreed by other users. The blocks are "chained" together through the information in each proceeding block. Information in previous blocks can't be changed without affecting the following blocks, so there is no way to alter a blockchain. Hell yeah.
DEFI uses emerging technology to remove third parties in financial transactions. Remember what smart contract is? Yes, smart contract is replacing the middle man. While taking control away from third parties, decentralized finance doesn't provide anonymity. Your transactions may not have your name, but they are traceable by the entities that have access. If you use DEFI, you basically use smart contract. Yes again, transparency but anonymous. Cool shit.
Centralized Finance can offer you loans, saving money, trading etc. But, it is still under the law/regulations. So you can't do what you want as it is limited. In DEFI, there are no regulations, no controls, no nothing. You can be creative by making new innovations because there's no fucking regulations. No fucking boss who got the control. DEFI definitely could offer things that Centralized Finance couldn't do.
Ok humans and aliens or whatever the fuck you are. That was the explanation of Decentralized Finance or DEFI from me. Been told you in every article that I'm a new baby on the gang so I'm all open for critics and corrections. Chachababe ouuuuut!