What is DeFi and how will decentralization change the financial world?
The concept of inclusivity has snowballed into making the financial sector more open.
Even if you aren't familiar with crypto, you've probably heard about "DeFi" or decentralized finance, courtesy of crypto evangelists who want to decentralize money, and all our global priorities.
One can argue that over the years, traditional finance has evolved enough to offer us many innovative services, but all of these are backed by centralized authorities. Take the internet for example. It is the best invention of the 21st century, but still has a handful of entities behind it, like big tech: Amazon, Facebook, Google and others that have taken the lead to develop the web, leaving SMEs to align with them or exit the competition altogether.
Blockchain companies, however, want to decentralize at least some aspects of existing technologies, like how we manage our data, money, health and legal systems for instance. DeFi enthusiasts expect this ideology to trickle down to finance, which will help them develop virtual marketplaces that could be similar to their traditional counterparts.
How is DeFi different?
Consider yourself in labor quarters for now where you suddenly have to send money home. Well, you turn to banks, right? But how do you send enough money back when most of it goes for paying remittance fees. Plus, what do you do if your local bank is shut for the weekend or for a public holiday?
At this point, you could turn to decentralized economy. DeFi networks are always open and have a wide range of payment services that are even peer to peer (p2p). This makes cross-border payments instant, and cheaper since you don't pay extra fees to middle entities. Moreover, DeFi supports smart-contract based lending and staking services that allows people to earn better returns than existing financial products.
Ironically, counter arguments state that people won't trust DeFi products because it doesn't have any central authority. However, for a decentralized economy to better align with the real world, the concept of open finance must be accepted in its entirety. This is why BitOasis and other crypto exchanges are emphasizing its use cases by listing DeFi-relevant tokens. With mass adoption at the doorstep, DeFi tokens, and their offerings will be hard to catch once their full potential is put to real world use.