Explaination on How Difi can one day liberate finance

Evolution is the answer to everything that exists and finances too.

Since the financial crisis of 2008, many government practices, central banks, and industry-focused players have been questioned. The birth of Bitcoin in 2009 provided the world - or at least part of it - with the tools needed to develop another type of financial system, based on distributed consensus, not fiat centralized.

Fixed funds, or DeFi for short, is a system in which customers have access to financial products directly across a nationally divided blockchain network, without the need for traders such as banks and brokers.

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The aim is to promote financial democracy by replacing central institutions such as banks with direct, interpersonal relationships. Every financial service we use today - savings, debt, insurance and much more - can one day be on the blockchain, not the bank.

That’s because people’s dedicated platforms use another system, not just plug-in to existing banking and financial systems. These platforms are designed to be independent of their developers and sponsors over time and ultimately dominated by a community of powerful users emerging from holding protocol tokens.

According to a 2020 report in Elsevier's Journal of Business Venturing Insights, "Blockchain technology can significantly enhance the scope and effectiveness of peer-to-peer transactions, transform business models that are previously unpredictable." and new, interdependent, unlimited, and transparent. ”

Defi tools: smart contracts and dapps

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‘Smart contracts’ are programs that run on blockchains and can be started automatically when certain conditions are met. These smart contracts help his developers work harder than sending and receiving cryptocurrency.

For example, a smart contract can be used to establish a loan agreement between two people. If certain goals are not met, the bond can be broken. All of this would have been done automatically with computer code, eliminating the need for a bank and any other middle person.

Smart contacts like these are used to create internationally distributed apps, or dapps for short. Dapps is similar to standard apps and similar functions. The main difference is that they are run on a peer-to-peer network, like blockchain, which means that no single business manages the network.

The dangers of Defi

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Fixed currencies, like Bitcoin itself, are in the early stages. The total current value (as of November 3rd) locked in DeFi contracts worldwide is estimated at $ 107 billion, according to DeFi Pulse.

As a new system, DeFi comes with its own set of risks and adverse problems.

Crime and scams: DeFi is still plagued with hacks and scams like DeFi “rug pulls,” where cybercriminals issue financial regulations. That’s because many DeFi platforms use smart open-source contracts, which gives hackers the opportunity to explore these networks to find vulnerabilities.

In July, the Defi forum Poly Network was attacked by hackers, who pulled out a massive cryptocurrency robbery. Baby
Rs 613 million digital coins, only to return tokens worth $ 260 million less than a day later.

No backup: Like your bank account, DeFi and cryptocurrency wallet should be protected with a secret key. The secret key is a long, unique code known only to the owner of the wallet. Good thing, isn't it? The problem is that if you lose your private key, there is no way to get your money back. Always.

DeFi in India

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In October, ET reported that the Reserve Bank of India was looking at red-flagged DeFi platforms as India had no law to deal with cryptocurrencies, let alone DeFi.

"There is no clarity about the rules of cryptocurrensets so forums that deal with crypto finance or crypto banking operate in an empty regulatory environment. Also, which administrator should monitor these forums.

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