London, Europe Brief News – In today’s world, most financial transactions are being made using digital platforms. The introduction of digital platforms has almost decreased the use of banknotes and coins for making financial transactions.
The supporters of De Fi claim that it will soon eliminate the need for banks for all kinds of transactions. In order to understand the functioning of DeFi, we will have to go back to the origins of Crypto.
Bitcoin and Ethereum
The introduction of bitcoin was took happened in 2008 by Satoshi Nakamoto promising a revolutionary rejection of banks and financial institutions.
In a 13 years period it has not only brought out 8000 other cryptos but also gave birth to the concepts of Crypto wallets, NFT marketplace and more.
The most prominent bitcoin innovation is the emergence of Etherum on the back of its blockchain. Etheurum has expanded the use of blockchain beyond being only a simple payment system to introduce the concept of smart contracts.
Smart Contracts
Dr Merav Ozair, leading blockchain expert said “ Any contracts that you do in the real world, whether you are taking a mortgage or loan or you would like to trade some stock or bond, it’s rule-based. So this rule-based approach can be coded.”
Smart contracts are pieces of code that automatically perform actions if they meet the desired parameters.
Zeller explained “ these smart contracts cannot be reformed and will have the same code that is set to run in the same manner.”
Why do we need it?
There are certain reasons for that and the first of them is efficiency, eliminating intermediaries to make the transaction process smoother.
The second benefit of using De fi is to cut down the intermediaries governing transaction fees which are a bit too high than the ones you pay on De fi apps.
The third one is that the person does not need to have a bank account to access financial tools. You only require a stable internet and that will do fine.
Will DeFi spell the end of financial institutions as we know them?
DeFi seems to have more than what the traditional finance system offers so do we assume that it’s going to be an end to the traditional finance system? This is what the experts have to say about it.
Alex de Vries, founder of Digiconomist.net website said “ The question is to what extent will the rest of the world really want to be on Decentralised finance because ultimately a key model of the decentralised finance is you are going to be your own bank”
