What DeFi can do and why it will be the future of finance?
DeFi or Decentralized Finance is a form of finance without control from the middle man. DeFi is different from traditional finance as it was developed by Blockchain Technology for users to access other forms of financial services.
There are three types of DeFi that users commonly use:
Lending is like loan services adapted by Smart Contract. Lenders will lend out their personal crypto through Smart Contract and receive loan interest as an income. Users who wish to borrow cryptos must have their own assets more than the amount of the loan they wish to lend. When borrowers lend crypto, they have to put their assets as collateral and If borrowers do not repay the loan amount, their collateral will be forfeited.
Yield Farming or aka ‘Farm’ is the way when users deposit their crypto into some Yield Farming platform and receive passive income. Each Yield Farming platform will pay you a different rate of interest. Users can farm a pair of coins or just farm only one coin depending on your need. Users will receive the interest from yield farming and the amount of interest is varied up to the number of people participating in each platform and ratio of the interest given to each user.
In General, when traders wish to buy crypto in Cryptocurrency Exchange, they will use Stable Coin to trade such crypto. This does not apply to Swap. Swap is a method that you do not have to get into the Cryptocurrency Exchange to buy coins to hold such crypto. When you swap crypto, it will change your crypto to another crypto immediately. For instance, if you swap BNB to CAKE, your BNB will be converted to CAKE immediately. This way can help you avoid risk of crypto price volatility and you do not have to pay gas fee when you swap assets.
In conclusion, DeFi is a platform using Smart Contract to develop DeFi system. Smart Contract is very secure and everyone can review, check the Smart Contract platform. Smart Contract will automatically execute orders set forth in the Smart Contract. Unlike traditional finance or banking services, DeFi does not rely on a middle man to facilitate financial transactions.
This is why DeFi will be the future of the financial industry. If anyone wishes to have their own DeFi, Astra Studio is providing DeFi services as well. We have a professional team for you to consult in every step involved in developing the DeFi platform.