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 The Evolution of DeFi And Potential Impact on the Global Financial System

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Evolution of DeFi

 The Evolution of DeFi And Potential Impact on the Global Financial System

The evolution of DeFi in decentralization offers scalability, interoperability, and access to networks beyond Ethereum. Evolution in the blockchain industry moves in waves, the same with most technical domains. The building of layer-one solutions and infrastructures like Bitcoin and Ethereum was the first wave. The second wave came with the Initial Coin Offering (ICO) boom. 

Evolution of DeFi

As the ICO boom draws to an end, industry experts have been speculating on the next wave in the crypto industry. Most predicted that security token offering and initial exchange offering would be the wave. Their predictions never saw the light of day. Others believed layer-two scaling solutions like the Lightning Network and Plasma would be the bang. However, these layer-two solutions have proven to be essential solutions due to high network congestion and Ethereum gas fees skyrocketing. These solutions are unfortunately, far from their desired function. 

Also read: Proof-of-Work VS Proof-of-Stake: The best for scaling blockchains 

Other solutions like Cosmos and Polkadot are also within the same category as the solutions listed above. However, they are great in the sense that they permit the free flow of liquidity between networks. They also help to address the issues of congestion. 

This brings us to the evolution of DeFi or decentralized finance. It came at the right time to cove for the total disappointment of ICO. More than 70% of the ICOs were scams, while most of the remaining projects failed to provide good substation value. Before we go further to explore the evolution of decentralized finance, let’s know what DeFi is.

What is Decentralized Finance (DeFi)?

DeFi is a variety of financial applications in the blockchain industry geared towards disrupting traditional financial intermediaries. Decentralized finance (DeFi) is unique because it expands blockchain from simple value transfer to more complex financial use cases. DeFi does not rely on central financial intermediaries like brokerages, exchanges, or banks. It utilizes blockchain technology and smart contract to execute its transactions. 

You may be asking why we need decentralized finance when we have cryptocurrency. Well, cryptocurrency still depends on centralized exchanges for their use, while DeFi adopts decentralized exchanges to eliminate centralized point-of-failure. DeFi’s unique solution offers synthetic products that allow conservative investors to receive interest on their stablecoins. It also enables traders and crypto enthusiasts to leverage their current position. 

Also read: Investing in DeFi: Why you should rely on diversification and not short-term returns

One of the many signs of the brilliance of decentralized finance is the issuance of governance tokens. These tokens democratize the governance of the network while also promoting true decentralization. This feature has made the evolution of DeFi, the purest decentralized organization at the moment. 

The Power of Decentralized Finance 

There is no doubt that DeFi is changing the financial services world through its applications’ composable infrastructure. Its functionality and consumer benefits are also essential to how DeFi is augmenting the global financial system. The DeFi project is tackling long-standing issues and solving the inefficiencies in our current financial system. It improves financial inclusion, reduces cost, and increases liquidity. 

Outside finance, there has been a growing interest in DeFi and its potential to improve existing systems. In the DeFi space, there is what we call “Composability” or “Money Legos.” It refers to how you can connect the ecosystem’s components to form new and more powerful and useful applications. A component of the DeFi ecosystem may allow you to deposit funds and accrue interest, while a second allows you to direct that interest to a non-profit of your choosing. 

Another great advantage of the evolution of Defi is financial inclusion. Most people don’t consider accessibility to traditional financial services as a problem. However, the Global Findex Database revealed that about 1.7 billion people lack access to basic financial services. DeFi democratizes banking services. The current traditional financial system makes it prohibitively expensive to send money across borders. Without expensive intermediaries, decentralized finance (DeFi) unlocks for reduced costs and better interest rates for across border transactions. 

Evolution of DeFi Gives People Greater Financial Control 

The solutions of DeFi are giving users greater financial control over their finances. DeFi protocols and applications enable greater transparency and openness, lowering the costs and barriers to entry. With the evolution of DeFi, we can expect further devolution of power to financial service consumers. This approach will undoubtedly facilitate greater autonomy and flexibility.   

There are varieties of DeFi savings apps, offering users a way to save their money and receive interests outside of traditional institutions. Financial banking services and peer-to-peer lending are some of the many applications that give users greater financial control. With the availability of instant cash settlement, the ability to use digital assets as collateral, and no credit check, DeFi platforms certainly have a lot of appeal over traditional financial systems. 

One other segment of DeFi applications is decentralized exchanges (DEXes). With DEXes, you can trade digital assets without needing an exchange to hold your funds. The smart contract enables direct trades between the participants’ wallets. Users may also enjoy lower trading fees on DEXes, unlike centralized exchanges considering their reduced overhead. 

The Security Challenges of DeFi

 It is obvious that the evolution of DeFi has come with promising potential, but security challenges remain. Over the last few months, hackers have made away with at least $27 million from DeFi projects. In June this year, Balancer, a DeFi liquidity provider, experienced a sophisticated hack. The hacker tricked the protocol into releasing its tokens worth about $500 000. In another security breach, hackers stole $25 million worth of Bitcoin and Ethereum from dForce’s lending protocol (Lend.Me) through a re-entry attack. 

Read: What is Lightning Network and how does it work

Conclusion 

The evolution of DeFi and its integration into traditional financial services can drive innovation globally. DeFi’s potential to change the global financial system is undeniable, but tackling its security challenges is critical for continued expansion. The introduction of smart contract insurance is beginning to play a major role in the DeFi sector. Using insurance to reduce risks for users will make both developers and DeFi users to feel more secure and confident. The use of stablecoins is likely to continue growing. Hence, helping to drive mainstream adoption and also changing the way we engage in a transaction. As DeFi creates a better and more accessible financial system, the services controlled by banks and financial systems will start shifting. Although every new technology comes with its challenges, it will be exciting to see the creative and innovative ways we can use DeFi to improve the global financial system.  

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What is Cryptocurrency And How Does It Work? 

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Obiex finance website

Cryptocurrencies are decentralized digital assets that operate on blockchain technology that in turn operates by storing a ledger of every transaction on all nodes powering the blockchain. 

In layman’s terms, blockchain technology is like a record keeper, it collects data (in blocks) and links one block of data to another, forming a chain. The data on the blockchain is open for all to see and cannot be easily altered. Blockchain technology can be used for a variety of use cases besides cryptocurrency, ranging from voting to crowdfunding, keeping health records, etc.

Using Bitcoin as an example, nodes are computers connected to the network to mine Bitcoin,  – this collection of independent nodes working together is what makes the network decentralized.

The decentralized nature of cryptocurrency is down to the creators recognizing flaws in traditional banking & financial systems like governments and financial institutions acting only in their best interests and not in the best interest of the common man, leading Satoshi Nakamoto (the creator of bitcoin and blockchain technology) to take steps to rectify that.

Related: What are NFTs?

To make cryptocurrency transactions, you will need to have a set of both public and private keys that will act as passwords protecting your crypto wallet. 

The Public key is connected to your wallet address, allowing you to share the address with others to receive cryptocurrency, while the private key is known to only you and is what you will use to approve outgoing crypto transactions from your wallet. 

Trading Cryptocurrency on Obiex

Obiex finance website

With the popularity of cryptocurrency trading currently at an all-time high, the biggest challenge for many rookie traders is selecting which cryptocurrency exchange to trade on.

If you fall in this category, the immediate priority should be finding an exchange that allows rookie traders to make trades easily, doesn’t charge extra fees and is completely secure. That exchange is Obiex Finance.

In this guide, you will be shown how to navigate the Obiex mobile app & website easily and what to do to get started with making cryptocurrency trades. 

Getting started with Obiex Finance 

Obiex Finance is a digital asset exchange and financial technology (Fintech) platform that gives its users the ability to easily execute cryptocurrency trades from anywhere regardless of their skill level.

Their commitment to ensuring that users get the best experience is shown in how they allow instant swaps from volatile coins like Bitcoin to stable coins like USDT, and vice versa, without confirmations. In a market where the value of crypto can fluctuate wildly, this feature is especially valuable as it allows users to seamlessly switch between making profits to saving those profits in a more stable currency before the value drops.  

To create an Obiex Finance account, simply head over to their homepage, click on “sign up”, fill in the required fields and verify your email address. After that, create wallet addresses for your crypto assets and you’re ready to start trading!

The cryptocurrency available for trading on the Obiex Finance platform are: Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Polygon (MATIC), Dogecoin (DOGE), Tether (USDT), Binance USD (BUSD), and USD Coin (USDC).

Getting Started with Cryptocurrency trading

After creating your Obiex account, you need to follow these simple steps:

  1.     Have a Trading Strategy: Trading cryptocurrency without having a strategy in place is the easiest way to lose your money. You will need to research the various crypto trading strategies thoroughly and choose the one that best suits your needs and temperament. For example, if you’re a patient person who is content to make smaller, safer trades over a long period of time instead of making riskier trades, then scalp trading is the best trading strategy for you. There are also other crypto trading strategies such as Swing trading, position trading, Arbitrage, dollar cost averaging etc.
  2.     Pick the cryptocurrency you’d like to trade: There are several cryptocurrencies available on Obiex Finance such as Bitcoin, Ethereum, Binance Coin, Tether etc. Selecting which cryptocurrency to trade is usually down to making a choice; whether to stick with the safer, more established cryptocurrencies like Bitcoin or to go with the more volatile coins that have a high upside and an equally high-risk factor like the Dogecoin which can move in either direction based on what Elon Musk tweets.

It is also important to note that when you pick a cryptocurrency to trade, it would be wise to ensure that the cryptocurrency matches the strategy you pick. For example, if your preferred strategy is patient scalp trading, then investing in volatile coins that have a high upside but carry a lot of risk is not the wisest move. 

To swap crypto on Obiex Finance, add the wallet of crypto assets you’d like to swap, send the crypto to the wallet you just created, navigate to the ‘swap’ option on your dashboard, and select the coins you’d like to swap. You will receive the swapped coin in your wallet balance immediately without waiting for network confirmations.

  1.     Securely store your cryptocurrency: The same way you’d protect your goods and profits if you had a physical store is the same way you need to protect your cryptocurrency so it doesn’t fall into the wrong hands.

You can store your crypto securely on your Obiex wallet but if you want an alternative, physical wallets are also an option. Physical wallets allow you to store your crypto in secure hardware, offline storage device reducing the likelihood of online hackers stealing your hard-earned crypto. This is a list of reliable physical wallets you can use.

Conclusion

If you’re a newbie to crypto trading, the keyword is patience. Taking the time to properly understand the market before making trades will stand you in good stead. While risks occasionally pay off, a patient, long-term strategy is required to make consistent profits. For more information about trading as a newbie, you can check this out to understand unfamiliar crypto terms and to learn more about spot trading and futures.

Obiex Frequently Asked Questions | Obiex FAQs

  • Will I be charged a fee when I swap coins on Obiex? 

No you won’t. While other crypto exchanges charge for trades and require confirmations to execute swaps, Obiex allows you to make free, instantaneous swaps without the delay that comes with waiting for confirmation. This also helps you avoid unnecessary losses.

  • Can I trade crypto on Obiex if I don’t know much about crypto? 

Yes, you can! The Obiex Finance platform allows both rookie and experienced traders to make easy, safe trades regardless of trading experience.

  • Can I send and receive crypto easily?  

Yes, you can. To send crypto, you will use your private key to execute outgoing trades and your public key/your wallet address to receive incoming trades. You can also send and receive crypto using just Obiex usernames.

  • Why do I need to swap coins? 

Swapping coins allows you to either acquire a coin you think is (currently) more valuable than a coin you have a lot of. You can also use swaps to ensure that your funds are invested in a more secure coin like USDT if you feel the volatile coin you’re holding is about to go on a bear run and lose value.

  • Do I get a referral bonus when I invite friends to use Obiex? 

Yes, Obiex has a referral campaign that rewards users that invite their friends and family to trade the minimum of $10 on Obiex.

 

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