How will DeFi change the financial game in the long run?

DeFi is an abbreviation used to describe decentralized finance that runs on blockchain technology. To put it in simple terms, a financial system that operates on automated processes built on the blockchain without the management of a central exchange.

Let’s Understand How It Works#

As of January 25th, 2022, the total value locked in DeFi platforms across the world is a whopping $194B which is approximately a 530% rise from Jan 25, 2021 at around $30.8B. This figure denotes the total amount of money locked by millions of users into a decentralized, transparent and secure technology that is not run by any single individual or organization. It has multiple use cases like cryptocurrency, NFTs, assets, lending, insurance, trade exchanges and more.

So far, traditional financial systems are either run by governments or central organizations. They have direct control over what goes on with these systems.

DeFi breaks this system of centralized control, it makes the system accessible for anyone to contribute, and decentralizes governance to the community that participates in the system. Users stake their investments for the benefits of profitability and autonomy. They join in the long-term sustainability of the system by being transparent and reliable.

What Will Change with DeFi in the Coming Years?#

While DeFi is in its starting stages, and so far unregulated, it promises to be at the leading edge of change in the financial system in the long run.

Pros and Cons of DeFi to Conclude:#

Pros:

• Elimination of middlemen or any single entity owning and regulating finance
• More opportunity for everyone across the world to trade, stake and earn money
• A huge pool of transparent liquidity
• More ways to invent and innovate when it comes to products and services

Cons:

• Low to almost no regulation
• Open security risks
• Less access to off-chain information

We are excited to share the Neptune Mutual parametric cover product to make DeFi a safer and more protected environment for our community.

Have more inputs to share with us? Do let us know in the comments.