“Cryptocurrencies are just one example of decentralized technologies.” -Melanie Swan
Now that you know what DeFi is; what are a few examples, what can it be used for, and is this technology just a fad? The Decentralized Finance space is currently limited in practice, but in theory DeFi appears to have limitless applications. Today we will just focus on the limited, but successful uses of this blockchain technology. From open lending platforms (Dapps) to staking protocols which the title wave of Decentralized finance has really picked up steam headlong into the near future.
Defi has about 7 uses currently that have proved very successful. We can look at Dapps where users are able to lend each other digital assets, and earn interest at the same time. These applications usually use a smart contract where borrowers must show proof of colladrial before being able to borrow. Decentralized insurance is another example of DeFi technology in practice. Modern Insurance is a contract that transfers the risk of financial loss away from an individual or business to a single insurance company. These paper insurance contracts are full of fine print, and exclusions which help insurance companies avoid payouts, or at least reduce the size of the financial burden. Decentralized insurance allows pools of multiple investors to take on financial risk in exchange for insurance premium. The network is built on a transparent smart contract which can show all payouts on record so insureds can have confidence in being whole again after a loss. The investors have a direct motivation in these contracts. Stablecoins is the last example we will touch on tonight. Stable coins are a remarkable innovation of Decentralized finance because they are able to be pegged to traditional currencies like the USD to ensure a more stable value over time. This stability in price attracts traditional investors to the new financial realm without needing to assume as much risk as most Crypto Coins come with. Stablecoins are currently acting as a bridge between the new, and the old as far as currency is concerned. Stable coins have all types of uses yet to come, as they can be pegged against any type of “stable asset(s)” to assume their value.
2021 started this year with over $20billion USD invented in current Decentralized finance projects; that was up $9 Billion dollars from October of last year That means that the market almost doubled in 3 months. February is off to a fiery start when it comes to Decentralized finance adoption, and market growth! Tesla today announced the company had acquired $1.5billion of BTC, and that they would be soon accepting BTC as payment. Apple never reveals its secrets as we all know, but rumor has it that they may be the next big company to step into the DeFi space! The more companies that set sail in the crypto sphere, the more solid it’s fondation will become, and the mainstream terms like decentralized finance will become. I heard a quote the other day that said “everyday bitcoin is alive, central institutions are losing.” I could not agree more, and we here at ofthefreemarket.com think that we have yet to see the tidal wave affect this huge innovation will have on the world of Finance, and our everyday lives!
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