There is no doubt at all that the world of traditional finance is growing rapidly. Before the corona epidemic took hold, global banks were all set to improve efficiencies and reduce costs. Most of the central banks had understood an imperative role of digital blockchain-based currency in their economics.
But due to COVID-19 epidemic, the traditional finance is started to weak, and some cracks have begun. The system of multiple inefficient intermediaries will be forced to make severe changes at any cost.
Decentralized Finance (DeFi) would have huge effects on how we manage our wealth in future and on the traditional financial system. To know more about this, let’s go through the entire article.
Do you know what DeFi is?
DeFi Projects (decentralized finance) is the reciprocal of centralized finance. It comprises everything that avails loans, borrowing, staking or some reward to those who want to put capital to the system. The process is not like the traditional banks in which intermediaries or middleman take some commission. It removes all the roles of intermediaries or middleman between the procedures.
It creates smart contracts that direct to the user and the dealer. Along with this, it helps to decrease all the high costs established in the legacy system. These benefits are transferred directly to the end-user.
The Stage Is Being Set for Decentralized Finance:
As you know, due to corona epidemic, economic has become one of the most challenging terms for every country. The business owners are facing a big question to fulfil money supply and gain traction. Billions of people are quitting their job or shut down their business and factories. All they are starting to ask tough questions.
Now suddenly, how government can start print trillions of dollar to destroy all the problems. Even when they have to pay and collect taxes, why have they tolerated years of austerity and cutbacks leaving their healthcare systems vulnerable? Do you think that money really has any value to it at all anymore?
Those people who have the ability to think differently instead of their profit and government help then they can start to evaluate the things more in-depth. For an instance, is this money going to benefit the stock market and the top 1% of society instead of millions of individuals or businessman. By analyzing things this way, people will understand soon the actual value of money that is taxed as their savings are diluted.
Traditional finance will help all those people who are in need of credit right now. Some of the people are those who are expecting denying the requirement of the money. The banks may get lots of bailouts, but they will refuse to give it to the people. Moreover, they will set a limit that can customer withdraw, or they will shut down their branches.
As the awareness is growing among the people with new information, the individual doesn’t require taking participate in those bank activities which are not working well for them. This process can be broken or destroyed by removing central actors. And it comes in the shape of decentralized finance with C2C lending, high-interest accounts, and staking for returns.
Allowing People to Earn Interest on Their Savings:
Many DeFi products can be off-putting for the crypto user as they still require more time to understand the easy use of it. The process is quite different rather than using a simple Visa card. But as time passes, people will learn it soon, and continued improvement of products adoption will steadily grow.