Defi has been very popular these days. Finance structure can be decentralized with Defi.
However, Defi is a peer to peer financing system where no bank or intermediaries are required. However, is it possible that banks are running some sorts of blockchain based platform, which can help them to reduce the rate of default loan?
Or, how blockchain technology can help in managing non performing loans? Share any idea you got or share any project you know.
P2P lending is a dangerous system. I have personally experienced it with BTCJAM website few years back and all I got is a page full of red glory. less than 10% people repaid their loan and rest all are now enjoying with out bitcoins. However, Defi lending is little different. here you will have to provide collateral assets against a loan which is locked in smart contract and it will be paid back to you once you repay the loan. So that's somewhat secured unless the value of the collateralized asset goes down. But the risk is higher than traditional financing.
Banks can definitely use blockchain based platforms, but that will be only for maintaining data. I don't think a Defi based system will be beneficial for them, because they usually deal in a single currency system for the retail customers. And every single loan taken out by retail customers can't be collateralized. It's easier for Defi because they deal in multiple currencies. So a true-breed Defi isn't beneficial in traditional finances. The risk of default is much higher and banks will end up loosing their capital.
