DeFi and Future of Finance - Part 2
In part -I of my article, I have discussed the basic concept of DeFi and how DeFi is disrupting the banking industry.
In this article, I have covered various DeFi use cases, DeFi Apps, and how they will transform borrowing and lending in a decentralized manner.
The table list a set of different DeFi use cases sharing the central benefits of DeFi:
What is DeFi Coin and DApps
DeFi Coins or DeFi tokens can be traded using decentralized Apps called DApps. These tokens are created without any third party involvement or control.
Not all DApps tokens are traded on crypto exchanges- some enable you to lend and borrow in cryptocurrencies.
DeFi tokens are issued on the blockchain in an open-source environment. These coins can be pegged to the US dollar.
Total Value Locked in DeFi
Different categories of DeFi tokens
There are three types of DeFi tokens. These include:
Fee tokens
Governance tokens
Collateral tokens
Fee tokens
These tokens are designed to facilitate the collection of fees generated by a DeFi protocol. Each DeFi protocol has a specific fee for collection.
Governance tokens
These tokens provide governance rights to the users. Users can influence decisions and future development as per the DeFi protocol. Most DeFi token falls under this category.
Collateral tokens
These tokens stabilize a DeFi protocol. Collateral token fills the gap if there is any shortfall on a borrowing platform due to loan liquidation. As a result, price is pegged to the stability of a DeFi protocol.
Popular DeFi Tokens
Below is a list of popular DeFi tokens:
Top DeFi Trends
Traditional Financial Products Enter The DeFi Landscape
DeFi Seeks To Monetize Blockchain Gaming
Cross-Chain Technology Hopes To Solve Scalability Issues
Stablecoins
Liquidity mining
Etherium can be the next big thing
Legal and Regulatory challenges of DeFi
Let’s take a look into the future
DeFi has the potential to disrupt the banking sector. There are a number of startups working in this area and introduced different kinds of DeFi projects.
DeFi provides transformational solutions in the areas of—centralized control, limited access, inefficiency, lack of interoperability, and opacity—that arise from the current system of centralized finance. Decentralized finance offers new opportunities. The technology is nascent, but the upside is promising.
DeFi provides solutions that minimize fractions and maximize values to users. DeFi creators believe that all the existing financial infrastructure will be replaced with smart contracts on which the financial transactions can be carried out without any centralisation.
DeFi seeks to build and combine open-source financial building blocks into sophisticated products with minimized friction and maximized value to users. Because it costs no more at an organization level to provide services to a customer with $100 or $100 million in assets, DeFi proponents believe that all meaningful financial infrastructure will be replaced by smart contracts that can provide more value to a larger group of users.
DeFi has the potential to disrupt the banking sector. There are a number of startups working in this area and introduced a different kinds of DeFi projects. Considering the regulatory challenges, DeFi needs to travel a long path, however, the future is very promising.