Most crypto enthusiast and DeFi lover are still skeptical of the reality of global acceptance of Decentralized financial system. I woke up early on the 17th, day of October 2021, as it was my routine, I powered my PC to check on my daily crypto News, the headlights reads;
- Russian President Vladimir Putin says he accepts crypto’s role in making payments Learn more
- Crypto is a 'Major Priority' for Miami Mayor who aims to turn the city into the crypto capital of the world Learn more
- The Central Bank of Nigeria will launch digital currency within days as per Governor Godwin Emefiele Learn more
- Kenya ranked 4th globally in terms of crypto currency interest Learn more
- Brazil aims to tighten penalties for crypto-related financial crimes Learn more .
After reading through the various highlighted News, I was Pius to do more research on the introspect of crypto revolution, we're it's stands, I was equally able to analysis the possible feature of the space in few years from now.
History of Decentralized financing
According to David G W Birch I quotes, "when we think of the trajectory of crypto currency, Bitcoin smart contract, and decentralized finance, it can be helpful to fine historical analogues. These can provide a fair narrative but to facilitate communication among stakeholders, and to provide foundation for strategic planning. But it's important to fine the right analogy, but most important to derive the right lesson". Learn
decentralized finance, (DeFi) is an umbrella term for a variety of applications and projects in the public blockchain space geared toward disrupting the traditional finance world. Inspired by blockchain technology, DeFi is referred to as financial applications built on blockchain technologies.
The stablecoin-based lending platform, MakerDAO is credited to be the first DeFi platform to receive significant use. It allows users to borrow Dai, the platform's native token pegged to the US dollar. Through a set of smart contracts on the Ethereum blockchain, which govern the loan, repayment, and liquidation processes. In July 2020 their was upsurge of project, with the like of Compound finance rewarding lenders and borrowers of crypto currency on its platform. Still in July 2020, The Washington Post wrote a primer on decentralized finance including details on yield farming, returns on investments, and the risks involved. And in September 2020, Bloomberg said that DeFi made up two-thirds of the cryptocurrency market in terms of price changes and that DeFi collateral levels had reached $9 billion. Since 2020 the growth of DeFi has been uptrend and just in October 2021 the total value licked in DeFi surpasses $200 billion learn .
Criticism of Decentralized financial system
Despite the transcending growth attribute to DeFi globally, it's still faced with some challenges, which has served as barrier to it's growth and has hindered many nations of the world from completely adopting it. Some of these challenges includes;
- Large-scale scams and frauds during ICOs, the cryptocurrency world is vulnerable to frequent hacks, often resulting in large sums of money disappearing, which has made some people point fingers at crypto wallets and exchanges. One of the key reasons the government of China gave for the ban of crypto was, threat to citizens' assets and a tool for facilitating criminal activities like money laundering learn .
Other criticism also include, Blockchain transactions are irreversible, which means that an incorrect transaction with a DeFi platform or even deployment of smart-contract code containing errors cannot always be easily corrected.
Lastly the code for the smart contracts that implement DeFi platforms is generally open-source software that can be easily copied to set up competing platforms, which creates instabilities as funds shift from platform to platform.
The feature of Decentralized finance system
The interoperability seem to be the greatest advantage of the decentralized system of finance(the ability of computer to interract with each other), communication would allow users to share, view, and access information across the blockchains in the network, bridging interfenace and giving the exclusive right to interact with choice block chain.
The DeFi ecosystem is growing rapidly and most nations that one's kicked against it's development are now accepting it's existence. New project are founded on a daily basis with a particular usecase and product to offer.
Disclaimer
All write-up was burnt from research and personal option of the writer.