The DeFi Ecosystem: Building The Future of Finance
The decentralized finance (DeFi) industry started gaining steam in the summer of 2020, propelled by decentralized applications (Dapps). The sector has since managed to carve out a niche market that promises to herald a new era for financial products and services.
The DeFi space harnesses blockchain tech’s power to facilitate robust solutions that will likely reshape the existing financial ecosystem in the future. DeFi products look well primed to eventually replace most traditional financial services, including loans, savings, insurance, and trading.
Why Lending in DeFi is The Future
The DeFi ecosystem has grown exponentially in a relatively short period, with numerous protocols such as AAVE, Compound, and Synthetix emerging to offer users decentralized crypto lending and borrowing.
The sector is revolutionizing lending and has the potential to create wealth for billions of ordinary folks. What makes DeFi a truly disruptive innovation is its ability to replace traditional finance platforms such as banks and introduce products that act in people’s interests rather than big corporations.
The emerging industry finally lays the groundwork for crypto to realize its founding principles of universal access to financial services. For the first time, everyone can tap into DeFi to access financial products that institutions or governments can’t corrupt.
DeFi Introduces Democratized Finance
Multiple DeFi protocols have emerged since 2015, offering alternatives to the traditional financial network. Since these platforms run entirely on smart contracts that govern automated liquidity pools, they eliminate intermediaries in the borrowing and lending process and pave the way for democratized finance.
Platforms such as Compound and Yearn Finance are developing a new financial network based on transparent blockchain technology. These protocols push innovation with revolutionary solutions that allow crypto enthusiasts to exploit new use cases such as interest rate mining and yield farming.
The DeFi architecture also integrates solutions such as hedge funds, where crypto users can choose the best asset managers to pool their funds with and earn interest.
Widening Access to Financial Products
DeFi financial services look well primed to rival traditional models that have locked a significant portion of the population from accessing funds for a long time. There are an estimated 1.7 billion unbanked people worldwide who can finally tap into DeFi to utilize the power of compound interest and generate wealth.
The ability of smart contracts to facilitate peer-to-peer lending for small businesses and the global unbanked who are otherwise unable to access lenders is unprecedented.
The DeFi sector continues to attract app developers from across the FinTech world who are building platforms that focus on an enhanced user experience and the development of decentralized lending/borrowing.
The result is a transformational market that promises to herald the era of a free and fairer financial future for all in society.
Total Value Locked in DeFi Crosses $51 Billion
As per data from leading DeFi rankings and analytics website Defi Pulse the total value locked in various protocols has surpassed the $51 billion mark, indicating the high appetite that exists for transparent, decentralized financial products.
What makes DeFi appealing to ordinary folks is that, unlike traditional finance, the ecosystem cannot exist without its users. Essentially this gives the people power to be their own bank; they can thus access higher interest rates, margin trading, and investing opportunities tailored to benefit them and not the banking corporations.
As with any emerging technology, the DeFi space has been clouded by various teething troubles, mainly exploits related to ‘flash loans’. Moreover, the early innovation in the sector primarily focused on providing overcollateralized loans targeted towards margin trading.
Most of the pioneering lending Protocols offerings in the space are thus inherently inefficient in their capital usage and often create a barrier to entry for the average lender/borrower.
That said, the ecosystem has kept growing and developing at breakneck speed, especially since last summer. Multiple platforms are coming up almost every week, promising enhanced security, better user experience, and new use cases.
The possibilities that these emerging protocols bring include DeFi mortgages, borderless banking services, and opening up crypto and DeFi to pension funds.
Over a relatively short time, DeFi has managed to eat into the traditional finance market share. DeFi lending’s potential to disrupt the conventional models is enormous, especially with more mainstream payment service providers such as PayPal, Mastercard, and Visa entering the crypto space.
Wrapping Up
There are numerous DeFi projects out there, but our protocol, Lendefi, introduces secured lending that eliminates the risk for borrowers and lenders in a highly volatile crypto market. We developed this leading blockchain-based protocol to help anyone borrow and invest in crypto or lend and earn interest in a decentralized manner.
Our intent is to introduce some much-needed confidence to users, and that’s one of the core reasons we stand out from other DeFi lending platforms.
Our dev team have observed that the potential of DeFi-powered undercollateralized loans is massive, especially with more mainstream payment service providers such as PayPal, Mastercard, and Visa entering the crypto space. Therefore, we combined efforts to come up with a protocol that brings undercollateralized secured loans which also allows users to purchase a wide variety of supported crypto assets on the platform.
The Lendefi protocol will deliver leveraged trading and secured lending for cryptocurrency markets. Utilizing an undercollateralized loan model, Lendefi facilitates a trustless relationship between lender and borrower, managed by the protocol to remove counterparty risk.
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