DeFi In Shaping The Future of Finance
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Decentralised Finance or DeFi is one of the most emerging technological advancements of the future of finance which hardly common people can ever think of.
DeFi holds the key to complete democracy where no government entity or an organization would have control to modify or tamper with the transactions. Being public in nature, blockchain enabled transactions are referred to as DeFi. The main selling point of decentralised finance is the unavailability of any supervision or bounded limits to the transactions, free of any charges.
The public key generated and shared among the participants of the peer to peer network serves as a block linked to a chain of transactions. Such block created is immutable as a slightest decommission of it's security would lead to a failed transaction thereby notifying every peers within the network.
Availablity of Loans to Anyone
Photo by Andrea Piacquadio
Lending is one of the most vital segments of finance which enables financial organizations to operate. However lending for everyone is even tougher to actually happen for the underlying risks.
DeFi in lending is focussed on crypto loans and almost anyone can have the access to it. On contrary to the traditional lending process and keeping mortgage of assets as a security, such decentralised lending keeps a certain amount greater than the actual loan amount in cryptocurrency as a collateral.
Lenders on the other hand pool their lending cryptocurrencies and earn interest on it. Such benefits both the lenders as well as the lendee. Thus on returning the lent amount, the lendee can have the collateral back.
Enhanced Security to International Transactions
Photo by Michael Steinberg
Security through enhanced cryptography in chains of blocks, such decentralised blockchain transactions ensures immutability of records.
Cross border transactions enables some threats of cyberattacks which may lead to data breach and financial loss. Such transactions are more suceptible to threats as there remains lack of transparency where every country has their own rules and regulations for a transaction.
Blockchain can be a powerful tool to promote transparency and traceability of supply chains, help fight counterfeits and build consumers' trust.
Considering a blockchain transaction, the participants have the same network where each transactions are secured by a digital signature. To validate a single block every nodes in a network must perform thousands of hash computations based on the cryptocurrencies used. So, in order to manipulate a transaction, several such blocks are required to be changed at the same time which is impossible for any hackers.
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