Decentralized finance or Defi proposes a new economic model based on two key pillars: non-intermediation and decentralization.
Traditional economies usually rely on well-known financial agents that act as intermediaries in economic transactions.
These economic agents are usually banks or financial institutions from the traditional financial world.
Decentralized finance proposes the creation of an emerging financial ecosystem that uses blockchain technology to recreate and improve traditional financial services.
What are the main factors behind the growth of decentralized finance?
There are several factors behind the growth of decentralized finance globally, some of which are:
Technological Innovation
Blockchain technology, especially the Ethereum network, has been instrumental in the development of DeFi. Smart contracts enable the creation of decentralized financial applications that operate without intermediaries, offering transparency and security. Interoperability between different platforms has also facilitated the integration of multiple financial services.
Global Access
DeFi provides access to financial services to people around the world, especially in regions where traditional banking systems are inefficient or inaccessible. This has allowed unbanked individuals to participate in the global economy, promoting financial inclusion.
Attractive Returns
DeFi platforms offer investment opportunities with potentially high returns through activities such as yield farming and staking. These attractive returns have attracted investors looking for alternatives to the low interest rates offered by traditional banks.
Distrust in the Traditional Financial System
The 2008 financial crisis and other events have eroded trust in traditional financial institutions. DeFi, by operating transparently and without intermediaries, offers an alternative that many consider fairer and safer.
What do experts think about the growth of DeFi?
Cristina Loustanau, co-founder of Zona Tres, explained that the growth of DeFi is bringing financial services to people and places that have never had access before, democratising money.
María Fernanda Juppet, CEO of CryptoMKT, stated: “The evolution of decentralized finance (DeFi) is marking a before and after in the financial world, allowing millions of people to access, without intermediaries, products and services that were previously out of their reach.”
Finally, Claudio Cossio, co-founder of Meta Pool, added that the technologies that empower decentralized digital asset platforms (DeFi) have as their central axis the ability to allow users to capture the greatest possible value from these financial tools, that is, the transaction fees and commissions of these markets to which they provide capital. This is now available to people who have less than $100 USD.
Source: Ambito
