2020, the year of all the horrors, has been a good one for DeFi, and might as well prove to be the guarantee of a better, more liberated financial future. Amidst the COVID-19 pandemic, as it affects close to 32Mn (globally, at the time of writing)In a broad sense, governments have mostly been left baffled, and found waiting. Most of the institutions have taken a huge blow as a result of this pandemic, leaders have been too slow to react and not at all proactive in their approach, and most of the systems — both new and old, from healthcare, elderly care, testing, protective equipment supply chains, mental health, contact tracing, etc. — have fallen to the ground. Decentralized Finance, also known as DeFi, has come to the fore to rescue us during these times. It has picked up from where Bitcoin left. Let’s explore why we say so!
DeFi works on Blockchain
To understand the core reason behind the rising popularity and usage of DeFi, we should look at the underlying technology that supports it -- Blockchain. So, it is more about the future possibilities than immediate gains, as has always been the case with Blockchain-related technologies. Even when Bitcoin achieved the first-ever fanfare in 2009, it was quickly recognized, and even brought into practice by those familiar with it. Many called it the future of money. Roll down a decade later, and Bitcoin, with its decentralized global system of nodes and miners keeping the network operational and secure, has truly lived on its promises while offering more. Not only has it emerged as a reliable, secure, and fast way for people to permissionlessy send money to one another, it has also become an enterprise-grade investment vehicle, with an investment worthiness that only keeps growing! An investment vehicle or not, Bitcoin definitely remains money -- a decentralized currency for a new, hyper-connected world.
Check out: Cryptocurrency Wallet Development
If Bitcoin’s good, why DeFi?
Bitcoin as money still works as long as it relies on a financial ecosystem which is present around it. Otherwise, it is prone to collapse. As a result, it makes the entire financial ecosystem limited, as it consists of those that secure the network on which transactions are transmitted (miners and node operators), wallets, and exchanges where it can be exchanged for other digital and, increasingly, fiat assets.However, we know that financial services architecture incorporates a lot more in terms of functionality, like borrowing, lending, earning or paying interests, investing, and more. Bitcoin never had these as its use cases, but DeFi does! The next logical step in the evolution of crypto’s gradual assumption of the roles played by traditional finance is being taken by the growing Ethereum-based decentralized finance ecosystem.In many ways, therefore, DeFi is Bitcoin 2.0, and although based on Ethereum’s composability and smart contract functionality, DeFi furthers the Bitcoin narrative into the future that Bitcoin first allowed us to believe in. With every new protocol of DeFi, the future is coming closer to us -- a future without banks as we have come to know them so far! → DeFi demonstrates the complementary nature of Ethereum to Bitcoin. By recreating the financial system not from within but from the outside, Ethereum is hosting a movement that completes the circle Bitcoin started.Bitcoin democratized money by freeing us from it in its legacy form. Now, DeFi has captured the imagination of the crypto world as its natural extension — not just the democratization of money but the democratization of finance, promising a seismic shift in the way people bank in the future.That paradigm shift will bring forth benefits that were only dreamt of, not more than a decade ago. A much-needed shift to balance the lopsided financial landscape of this world.
Check out: Stablecoin Development Company