[Wise Crypto Life] 19. De-Fi
[Wise Crypto Life] 19. De-Fi
Recently, the blockchain industry is paying special attention to NFT and De-Fi. It is only a matter of time before De-Fi changes the global economy. In this edition of Wise Crypto Life, we will explain what 'De-Fi' is and what role it plays in today's society.
What is De-Fi?
De-Fi stands for “Decentralized Finance"; as the name suggests, it refers to the decentralization of financial transactions previously managed by banks.
Currently, we carry out deposits, loans, and investments through intermediaries such as banks and credit card companies.
This has been the "traditional” method of financial transactions until blockchain technology came and dispersed that centralized authority from the institution to the individual. There are already various De-Fi services that are used for deposits, mortgages, and collateral loans.
Pros and Cons of De-Fi
The most convenient aspect of De-Fi is that it can be used anywhere as long as there is an internet connection. This is especially advantageous for countries with low bank and credit card holder percentages as it makes international transfers easier and faster. Additionally, unlike banks, De-Fi transactions can be carried out 24 hours a day without the provision of personal information required by existing institutions.
There are both pros and cons to decentralized systems in regards to flows of funds. Personal information can be protected, but this could also potentially be used for money laundering. Above all, the understanding and users of De-Fi is still low, so liquidity cannot be guaranteed at the moment. Fortunately, these shortcomings are expected to be gradually supplemented. So far, an insurance platform called Unlashed has been launched aiming to protect crypto users from losses resulting from centralized exchange failures and smart contract hacks.
Changes in Financial Institutions
What will happen to existing financial institutions if De-Fi becomes more universal? Are they going to be pushed out? Many banks and financial institutions are diligently grappling with ways to harness this new trend and avoid such tragedies. Banks are actively investing in cryptocurrency and trying to collaborate with them. Recently, Visa launched a credit card company in which the system allows payment of stable coins.
How will traditional banks evolve in the rapid pursuit of De-Fi and Fintech?
Stay tuned on how the future of finance will evolve.
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