What is decentralized finance (DeFi)? Is this the right time to join DeFi? What should I do first after joining a DeFi platform? These are some of the questions that run through the mind of most people looking forward to joining DeFi platforms. This post is a comprehensive guide highlighting why now is the best moment to start using blockchain services.
What is Blockchain Technology?
To determine how DeFi works and make the big decision of using related services, it is important to go back to the beginning and determine what it is. Blockchain is a decentralized database that runs without a central authority or management. Unlike banks that rely on clearly defined structures and hierarchies, blockchains are not owned by any single entity. Instead, all decisions are based on consensus by users on the networks.
When transactions are made on a blockchain network, the information is added to the next block, where it becomes permanent. No one, whether the nodes spread on the network or courts, among others, can make changes. The idea of giving every user full control over their finances has made DeFi very attractive. Why stick to traditional banking where there are so many regulations when a simpler and more reliable option is available right away?
What is DeFi and How Does it work?
If you have a bank account, credit card, and several online wallets, they might look perfect, but the alternatives are more awesome. Decentralized finance (DeFi) is one such option designed to offer almost all the services you get from banks but in a decentralized way. This means that instead of applying for a loan and taking weeks or months before approval is made, DeFi only requires minutes. Remember that you are not even assured that the loan will be approved when applying for loans through banks.
Although we can say that DeFi was slowly but surely going to come by at some point, the COVID-19 pandemic hastened that “time.” When banks closed doors to clients because they were considered high-risk parties, DeFi was there to provide the financial services they needed. For example, you could easily access a loan through DeFi when a bank had declined. All that you needed was collateral in the form of crypto coins. Now, every service you get from a bank is likely to be available on a DeFi platform.
Why You Should Join DeFi Now
The main reason for joining DeFi platforms is that they provide cheaper financial services compared to banking. Let’s take an example. If you wanted to send funds abroad, the transaction would be expensive and take long to complete. The cost of such transactions is caused by high running costs, including rent, taxes, wages, and profit margins. DeFi platforms charge a very small amount because there is no central administration to target high profits or add unnecessary overheads. You only need to pay a small amount to incentivize the nodes that confirm transactions and forge new blocks. Why pay more to send funds when a smaller amount would be enough?
Other benefits of joining and using DeFi platforms include:
● All your transactions are kept confidential.
● Your assets, such as funds stored in a blockchain network, are free from seizure by local authorities.
● You can easily take a loan without being subjected to background checks, such as credit rating review.
● You can make passive returns by staking your coins or yield farming through DeFi platforms.
These are only a few of the benefits that come from using DeFi platforms. The list can be way longer. So, if you are yet to join a DeFi, the truth is that you are losing a lot. Therefore, it is time to pick a good DeFi platform, buy some cryptos, and start using them for different services. Visit hi.comto learn more about DeFi, blockchain, and related services that you should start using right away.
