In its most simple form, decentralized finance is a concept where financial products are available on a public decentralized block chain network making them open to anyone to use rather than going through a middleman like banks or brokerages and our company LokumFinance is using this most ultra modern financial system. Unlike a bank or brokerage account, a government-issued ID, social security number, or proof of address are not necessary to use DeFi. More specifically in LokumFinance, DeFi refers to a system where software written on block chains makes it possible for buyers and sellers and lenders and borrowers to interact peer to peer or with a strictly software-based middleman rather than a company or institution facilitating a transaction.

What is DeFi?

In its most simple form, decentralized finance is a concept where financial products are available on a public decentralized block chain network making them open to anyone to use rather than going through a middleman like banks or brokerages. Unlike a bank or brokerage account, a government-issued ID, social security number, or proof of address are not necessary to use DeFi. More specifically, DeFi refers to a system where software written on block chains makes it possible for buyers and sellers and lenders and borrowers to interact peer to peer or with a strictly software-based middleman rather than a company or institution facilitating a transaction.
In our company LokumFinance, DeFi is commonly placed in the domain of block chain and crypto currencies. But its scope is much wider. To understand the thought processes that led to the development of decentralized finance, it is important to understand the current state of the finance ecosystem.

What Are the Components of DeFi?.

At a broad level, the components of DeFi are the same as those for existing financial ecosystems, meaning they require stable currencies and a wide variety of use cases. DeFi components take the form of stable coins and services like crypto exchanges and lending services. Smart contracts provide the framework for the functioning of DeFi apps because they encode the terms and activities necessary for the functioning of these services. For example, a smart contract code has specific code that establishes the exact terms and conditions of a loan between individuals in LokumFinance. If certain terms or conditions are not met collateral could be liquidated. All of this is done through specific code rather than a bank or other institution manually doing this process.
All components of a decentralized finance system belong to a software stack. Each layer’s components are meant to perform a specific function in the building of a DeFi system. Compos ability is a defining characteristic of the stack because the components belonging to each layer can be composed together to fashion a DeFi app.

The Current State of DeFi

Decentralized finance is still at the beginning stage of its evolution. The total value locked in DeFi contracts is over $41 billion, as of March 2021. The total value locked is calculated by multiplying the number of tokens in the protocol and their value in USD. While the total figure for DeFi may sound substantial, it is important to remember that it is notional since many DeFi tokens lack sufficient liquidity and volume to trade in crypto markets.

Importance of DeFi in LokumFinance

Most of the existing and potential apps of LokumFinance contain the development and execution of smart contracts. On the other hand,in LokumFinance a common contract utilizes the legal terminology to define the relationship terms between the entities entering the contract. These terms are written in entire computer code, and smart contracts have different abilities to fulfill the terms by applying computer code. Using these smart contracts will be easier, faster, and decreases risk for both the parties in Lokumfinance.

It is still very early for LokumFinance. Even though many of the DeFi applications are still a less-than-ideal choice compared to more traditional alternatives for many people. The DeFi movement is being built with a focal point on the elimination of the need for trust – not performance. When a decentralized trustless alternative financial system is even somewhat widely adopted, the performance issues will be worked out in our company.

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Whitepaper: https://docs.lokum.finance/
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