Since June 2020, decentralized finance – or DeFi – has increased in value by about 1200 percent. What is DeFi and why should you be paying attention to the latest decentralized finance trends? We answer these questions here.
The world is moving towards a decentralized future, and decentralized finance is one of the hottest topics to know about right now. In this article, we explore what you need to know about this exciting new space, as well as the benefits investors can expect.
What Is Decentralized Finance?
Decentralized finance refers to the use of blockchain technology, primarily Ethereum, as an alternative to traditional financial markets. The aim of DeFi is to reduce financial market risk, improve security, and increase transparency. The blockchain is able to do this by removing third parties so that there are no centralized databases storing data.
3 Must-Know Decentralized Finance Trends
Decentralized finance trends have shown exponential growth in recent years. Why are people suddenly interested in it? The answer is that it is a global phenomenon that democratizes financial transactions. Through decentralized software applications (or dApps), users can take part in financial transactions directly with their peers, without involving big banks or lending institutions. The most disruptive trends in DeFi include:
- Lending – You can lend your cryptocurrency or take out a loan without filling out paperwork.
- Trading – Trade assets on the blockchain with your peers, just like trading stocks.
- Saving – Blockchain savings accounts typically earn more interest than what you would earn from a bank.
The Benefits of Decentralized Finance
Users benefit from DeFi in many ways. For one, it brings more liquidity to the market because investors can trade in any type of asset. The system is also significantly less vulnerable – fraud and abuse are less likely to affect large groups of users because of the added security of blockchain. Lastly, decentralized finance promotes inclusive growth by connecting people all over the world through loans and investments without involving traditional institutions.
- Everyone has access – By creating a wallet, you can easily access your assets. You don’t have to open an account or apply for anything.
- It’s secure – Blockchain is anonymous, which means your personal information is never at risk.
- Users have the flexibility they need – No more waiting for transfers to go through. No more asking for permission to move your assets.
- It provides transparency – All parties involved in a transaction can see exactly what’s going on.
Want to cash in on these decentralized finance trends?
As a result of deregulation in financial markets and the dominance of central banks, many people are looking for alternative options to achieve stability, and with good reason. DeFi is a new concept that helps people find better ways to invest their money. The opportunity doesn’t stop there, either. If you have an idea for a decentralized app that you think has potential, you need to get the funding necessary to get it off the ground.
Are you interested in learning more about how Open Access Ventures can help you realize your vision? See our work.