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Hi guys,
It is yet another important week in the steemit engagement challenge and I'm delighted to be in attendance in this week's contest. Just like the previous weeks, this very week also presents a very interesting topic worthy of discussion. We will be looking at a trending form of technology That is called Decentralized Finance, I do hope you enjoy reading through my blog today.
Explain in your own words the DeFi world Why is it important? Let's talk about it.
DeFi is an acronym that stands for Decentralized Finance. From this word, you will agree with me that this is a combination of two different words which are decentralized and finance. I will talk about them one after the other before we merge them to get a more clear understanding of the said term.
The term decentralized simply means there is no central authority in charge of the happenings in the arena. This means that almost every node is dependent on each other hence no nice controls the other.
In the case of finance, we are looking at a familiar term that is associated with the economy of a given establishment or an individual or an organisation.
So combining these words, we can see decentralized finance as a financial system that has no central authority or power. Here all the financial activities are not been controlled by any central power anywhere be it the transfer of money, money circulations etc.
Before this time, this is not the case in the financial institution because in our various countries today, we deal with centralized finance where our transactions are controlled by a particular centre authority. This has been the case before the arrival of the decentralized finance system.
The central bank of a country as we all know controls all the inflow and outflow of money within a country. So transactions must be verified via the teams of these banks before they can be processed. This is not the case in decentralized finance because no authority controls the transaction process instead it uses modern technology which is the blockchain to verify transactions worldwide.
Why is it important?
Decentralized finance is important for so many reasons. Here I will be discussing briefly some of the reasons that made makes it important. Stay with me as we go on a ride.
One of the most important of decentralized finance is that it allows people to be the real owners of their assets since they have the keys to their wallet and can perform any transactions at any point in time no matter the weight of the transactions. You don't need to pass through procedures to do this because with just a click it can be done.
Security and elimination of central authority is other important aspect of decentralized finance. We have to see that since there is no central authority, our data are safer hence no one has access to your funds apart from yourself.
Decentralized finance also has gone a long way in eliminating the time consumption in carrying out a transaction that is usually seen in centralized finance. There are much more important of the DeFi system such as scalability, transparency etc.
DeFi Vs Centralized Finance. Advantages and disadvantages, let's talk about them.
Decentralized finance as I have earlier explained above, it is a type of financial institution that has no central authority. This Defi validates its transaction using blockchain technology. Here the 2 parties involved in the transaction perform their transaction without any interference. Let's look at the advantages and disadvantages below.
Advantages of Defi
One of the major advantages is that the technology is transparent and highly secure.
There is no central authority that controls or dictates how transactions should be done.
It consumes less time when it comes to performing transactions.
It uses P2P which means that one can make the transfer to anyone and anywhere around the world provided the parties are connected via the internet.
Disadvantages of Defi
One of the disadvantages of the Defi system is that most persons have not adopted it because it does not have a central authority.
Another disadvantage of the Defi system is its complex nature and many people do not have complete knowledge of its operation hence adopting it is difficult for them.
The volatile nature of the crypto assets is another reason why most people are scared of adopting the Defi system.
Since transactions in crypto are almost impossible to trace where it is coming from, crypto assets can be used to perform illegal transactions such as buying drugs or arms for terrorism.
Centralized finance, on the other hand, is a type of finance which has a central authority that controls the entire transactions that go in or out. A case scenario is that of the central bank. Every transaction is controlled by them hence they have detail and they must approve your transaction before it could be executed.
Advantages of Cefi
Centralized finance is the only way where the country controls their economy thereby enabling them to stabilise its economy.
Since centralized finance is controlled by a central authority, contacting them for any issues is easier hence users don't get stranded in case of any problem.
Here all users must be properly verified providing personal information so that every form of the abusive act will be easily traced and tackled.
There are not many technicalities with the centralized finance hence most persons can operate it and the interface is always made more user-friendly.
Disadvantages of Cefi
Being centralized finance, the users do not have complete authority over their assets.
Users must also ensure they obey every rule and regulation set by the central authority if they want their transactions to be safe and their money intact.
Transactions in the Cefi are not as fast as that of the Defi especially if it is a transaction that needs to go within countries.
More charges are involved in performing transactions in the Cefi. This is considered even higher when it is between countries.
Have you used decentralized Exchange? Tell your experience and explain a Decentralized Exchange. Show screenshots.
Yes, I have used the Binance smart chain wallet on my MetaMask app. This wallet is incorporated into the MetaMask application. I first used it about a year ago when doing a particular crypto academy assignment given by professor
@sapwood.
Binance smart chain wallet
This wallet is an official wallet where you can send or receive BNB I.e the binance native token. Well, during my experience with it, I was able to make use of the token I have in the wallet to also perform an assignment task where I created a coin. Paying the BNB as a fee for the transactions.
The word decentralized exchange is a marketplace that deals completely with the peer-to-peer transaction of crypto assets which means that there is no third party or anything of the sort to bridge the transaction. It is usually between the two parties involved.
Give us your opinion about the future of DeFi.
In my opinion, the future of DeFi is quite a bright one. Taking into consideration all the advantages attached to this innovation, there is no doubt that the future is quite brighter. Recently, we have seen many people and many nations adopting the use of cryptocurrency and also the economy of the world is gradually changing by the day as well.
More also, due to the security and transparency, it shows that at no distant time a lot more users and stakeholders and even nations will key into this new method of finances. So the future associated with Defi is a great one which will be achieved sooner than expected.
Conclusion
Defi which stands for decentralized finance is a method of finance that has no central authority controlling the flow of money. Here transactions are validated in the blockchain and it uses the P2P format to execute its transaction.
Well explained post about the decentralized financial system. No doubt, there are lot of advantages of the DeFi over the CeFi. One of the importance of defi has expressed by you as below.
You are very true that the users are the owner of there friends by their own and this thing creates satisfaction among the users. Thanks to the descentralised finance system for some great innovations.
Thanks a lot for such a precious post and wishing you a very good luck for the contest.
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Thank you for your comments and contributions my friend.
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You have provided a simple, clear, and beautiful presentation on decentralized finance.
This is one of the features that were eradicated in DeFi, we can transact freely without going through third parties or authorities. Also, there is no limit to the transaction one can do in a day unlike centralized finance when there are limitations to the amount you can send or withdraw in a day. I like your explanation about the topic, thank you for sharing.
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Thanks for your comments and contributions
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Congratulations, your post has been supported by @steem4nigeria. This is the official community account of Nigerians on Steemit. You can reach us here on our community account.
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You have really taken time to do all the analysis. Please i would like to chart with you. This is my contact 08061556125. Thanks
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