The invention of cryptocurrency has become a game-changer in technological development and financial services. The decentralized finance (DeFi) movement is taking the industry by storm, allowing people to make the most of blockchain technology securely and transparently. DeFi is revolutionizing traditional financial systems and providing ample opportunities for investors, developers, and users.
Here are five problems that DeFi can help solve.
1. Anonymity in Transactions
Identity theft is a serious issue. Someone can trace the owner of a transaction and plan evil activities. DeFi solutions can help protect the privacy of those transacting by providing anonymity and making it difficult for others to trace the source of funds or the recipient. The transactions only involve digital wallets that do not unveil user information to the public.
Sometimes, you sell your assets and want to avoid trouble. You would not want anybody to know about the transaction except you and the buyer. You would not need a written contract or any other evidence of your trade. That is possible with DeFi, as it offers anonymity to both the buyer and seller. The funds will go directly into your wallet without anyone knowing.
2. Security of Funds
Ever heard of banking systems getting hacked and millions of dollars lost? Unfortunately, security breaches have become the norm in financial systems. DeFi provides robust security for all its users. Decentralization means nobody can access digital tokens except for the authenticated owner. That reduces the risk of hacking, money laundering, and other malicious activities.
DeFi eliminates third-party involvement in transactions, ensuring that digital tokens are always safe. It makes DeFi a secure and reliable platform for people to store, trade, and exchange digital assets. You can use it as your savings account without taxes and ledger fees. Also, you will not incur hefty withdrawal fees.
eCommerce suffers because of chargeback frauds. Disputes on credit cards and other payment methods can cause merchants losses. DeFi eliminates this problem by providing a seamless, secure system for transactions that do not involve third-party services.
3. Funds Accessibility
The traditional financial system requires users to go through a tedious process to access their funds. For instance, you cannot withdraw your funds without lining up in the banking hall, filling out forms, explaining why you want to draw your cash – money that nobody helped you to make and save, and waiting for the funds to be released. This process can take hours to several weeks, depending on the amount you want to access.
DeFi helps reduce this stress by providing easy access to digital funds anytime and anywhere without requiring documents and lining up. You can transfer, withdraw, and exchange your funds from home. All you need is active internet access, and you can do whatever you want with your funds.
Timely settlements are also evident in eCommerce accepting cryptocurrency payments. Buyers can receive their products, and sellers can get paid quickly without the hassle of waiting for transactions to clear. Banking systems can take days or even weeks to complete transactions. But DeFi transactions require only a few verifications on the network and get approved permanently.
4. Transaction Costs
Have you ever tried to send money abroad? You must have paid a lot of fees in the process. The high costs of transactions can be disheartening, especially when dealing with small and urgent transfers. DeFi helps reduce costs by eliminating third-party involvement and the need for expensive brokers.
Also, paying with crypto does not require Forex services. That means the transaction is seamless and without extra conversion fees. You can send any amount without worrying about expensive costs. That is an advantage, especially when dealing with large amounts of money that would otherwise cost a fortune.
5. Opacity in Operations
Investments in centralized institutions, like SACCOs, banks, and stock markets, are barely transparent. You have no idea how they use your funds and if your returns are guaranteed. For instance, they tell you that your funds will earn 10% interest, but there is no way to verify this. The company could be going on a downhill spiral with your money in its hands, and you would not know.
DeFi operations are highly transparent because they use smart contracts that are traceable on the blockchain. You can view past transactions and audit the network to ensure everyone is getting what is due and nothing shady is happening behind your back. Also, you can tell how business operations are going, including profit and losses. That gives you peace of mind when dealing with DeFi investments.
Summing Up
DeFi is the future of financial services. It helps users save time and money when dealing with digital assets. Also, it eliminates middlemen, making transactions faster and more secure. This system is highly transparent, guaranteeing users that their funds are safe. With DeFi, you can seamlessly make payments and transfers anywhere worldwide. That makes it an ideal option for users who want to save and transact without worrying about potential losses.