Bitcoin Forum

Advantages of DeFi

The innovation provided by decentralized finance has many advantages over the traditional system, which relies on intermediary institutions such as banks and courts that provide arbitration.

Next, we will discuss each of the main advantages of the DeFi ecosystem.

No central authority

Decentralized finance offers the possibility of removing intermediaries from financial operations and instead, they propose consensus protocols that work without the need to be controlled by a central authority or a trusted third party.

There is no KYC

Defi allows its users to lend and borrow from each other, without using the same procedures as traditional finance. In the absence of a central authority, KYC (Know Your Customer), credit scores, etc. are not used.

Liquidity without borders

Defi is non-custodial, so its users keep full control over their money and can use it however they want. They can access the market from anywhere and at any time, as long as they have Internet, and dispose of their funds as they wish.

Accessibility and interoperability

Dapps from the DeFi ecosystem can be integrated with other platforms without requiring authorization. This means that a platform can create a new feature and then other dapps can integrate it into their product without asking for permission.

This interoperability gives people control and autonomy over their funds, making trade and investment accessible and allowing anyone to carry out transactions at any time and from anywhere.

Security

Since DeFi financial services are deployed on public blockchains , single points of failure are eliminated.

Transaction data is recorded on the blockchain and spreads across thousands of nodes, making censorship or hacking a very complicated and expensive task.

Low cost

Because the traditional financial system is based on generating profits for the intermediaries who control them, its services can be prohibitive for people with low incomes.

On the contrary, with DeFi costs are significantly reduced allowing all individuals to benefit from a wide range of financial services.

The topic would have been interesting if you have discuss disadvantages for knowledge benefits.
I have some points I would disagree as explained above.
I believe most of the advantages you mentioned was the initial intention 0f DeFi but what I have observed and experience in the mainstream is different. Cryptocurrency on written on papers are exciting at the beginning but challenges encountered on launched want to make you have a rethink.

NO CENTRAL AUTHORITY: protocol are designed to be user friendly with no central authority, is that really true when you look at some project where only the team makes final decisions.
Yearn finance for example, the founder Andre Cronje's left the project due to internal problems and then investors began to loose interest.
What happen to the initial excitement that drove the price by 3600%?
Definitely, there was central authority.

SECURITY: This is not new to everyone, countless hacks and stolen funds due to bugs on smart contract

LOW COST: DeFi hasn't been friendly with low cost of transactions. When the price peaked, the fees were so huge that one need to pay more than what you are sending especially low key investors.

What does KYC have to do with DeFi? In principle nothing at all. You can implement KYC, credits scores etc. on DeFi systems, in some countries it is even mandatory to do so nowadays. Likewise, there are or were countries (such as Switzerland) where you could have "centralized" accounts without KYC

Won't a DeFi project that implement KYC turned to centralized projects in investors eye? That's not a point as it's impossible for a so called DeFi project to ask for KYC, it will look like they don't know what they are doing, only centralized exchanges or projects have every right to ask for KYC

Absolutely agree. KYC it depends on the country. There are many places where it is needed, and this is not an advantage or a disadvantage. There are laws that are followed in progressive countries.

Disadvantages of DeFi

1. Not truly decentralized cos many are switching smart contract
2. There have been some hack cases on DeFi projects only so they aren't really secured.
3. DeFi looks nothing like real decentralized Finance but more like HYIP planet.

These symptoms and results of bad and fake DEFIs. A real DEFI would not have these problems.
Defi though a popular concept, is still far from perfect. They have a long way to go to become trustworthy and useful.
As for the price hype of DEFI tokens, it's catalyzed by scammer and fueled by stupid investors. There are no multiplying profit on Defi, anyone promising them is a scam and anyone hoping for that is stupid. DEFI is a convenience and cheap platforms that connects the two parties for their financial needs.

Absolutely agree. Its too routine to waste time on going through KYC, and then its not yet clear what will happen to your documents in the future. In defi, you yourself are responsible for everything and all responsibility is on you

Thanks for a nice post.
It's amazing that everything can only be solved with codes without being connected to the center.
lending, receiving interest and providing liquidity in different ways.
This ecosystem will grow day by day.

Defi is the closest philosophy for blockchain in my opinions. especially for financial system, like on the point number 2 removing intermediaries will make all the financial organizations or institutions more secure and more reliable

I wonder if the post is about the DeFi Ecosystem in general Or the applications on Defi. As far as tell it has centralized projects that pretend to be decentralized. Besides, I do not trust that the decentralized ones will remain decentralized if there is no rules to prevent them from being centralized.
Another thing one should really be careful about is governance that require huge amounts of tokens to be part of. It's quite risky to be invest in project with such governance requirement long-term.

In every ramifications I truly do like Defi concepts aside scammers invading and using the earlier rout of listing via uniswap to scam investors. Defi is an amazing financial uplifting and security wise best in Cryptocurrency. Farming, recieving and other means of achieving success in crypto could be seen via Defi concepts. Thanks for more insights regarding Defi innovation.

First of all thanks OP for detailing some advantages of DEFI. Decentralized Finance no doubt has been a top trend moving the crypto space and has been a blessing to many crypto enthusiasts. For me especially, staking anf farming have been so cool. It's either I stake a particular token to get back the token with a given APY or I provide liquidity and use the LP token to farm the given token, both have been profitable. In as much as DEFI has many advantages, some scammers have taken advantage to launch scam DEFI projects and if it persist, the DEFI bubble 🗯 might burst soon. However, DEFI is a long term trend and should be a driving force to foster crypto adoption.

There is no advantage of DeFi if the project's team doesn't have a plan to run the project for long or have a plan to scam after a few days or after the token sale. So we can not guess good things from any platform if the owner does not change their mind. You should also add the Disadvantage among with the advantage of Defi if possible. Then it will help people here to get an accurate idea about defi. :)

Always take care of the important documents you have, because if you do KYC carelessly, the fear that the documents you have are misused by other people, I always stay away from platforms that are required for Kyc

what has been explained on the first page is correct, but for me only a few,
in my opinion the advantage of Defi is that we can get passive income in this crypto currency, such as farming, or staking.
many features for sure, maybe in the future of the Defi program will be even better.

PeakDefi doing a great job explaining people what is DeFi. They have really cool vids on their youtube channel and it's really helpful. https://www.youtube.com/watch?v=2DN9W_YbLBM https://www.youtube.com/channel/UCxmRQFuEzfPqmgxtdtv8rmQ

Defi is turning out to become scam place, because in the recent days many defi projects are turning into scam and there is no central authority seems a false statement because the project team is having the complete control of it and decides to stop the development after making enough money for themselves.

For developers, the ease of creating applications becomes a clear advantage due to transparency and open source, in addition, projects in the DeFi sector can be developed on any platform that interacts with smart contracts. The procedure for creating your own digital asset and bringing it to the market has become noticeably easier and has become available to almost everyone.

Blocknet is one of the earliest projects to address the need for decentralized finance and atomic swap networks.