The Advantages Of Decentralised Finance Over Traditional Finance
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Finance Future: because the cryptocurrencies and the decentralized revolution industry (Defi)
In recent years, the world of finance has undergone a significant transformation with the emergence of cryptocurrencies and decentralized finances (Defi). While traditional finances remain popular, Defi offers a unique series of advantages that change the way we think about money and financial services.
What is cryptocurrency?
Cryptocurrencies are digital or virtual currencies that use encryption for safe financial transactions. They were introduced for the first time in 2008 by a person or group using the pseudonym Satoshi Nakamoto. Bitcoin, the first and most popular cryptocurrency, was created to act as an exchange environment, account unit and a precious shop.
The advantages of cryptocurrencies to traditional finances
- Security : cryptocurrencies use advanced encryption to guarantee transactions and control new units. This makes them safer than traditional intermediaries -based financial systems.
- Decentralization : cryptocurrencies are decentralized, which means that they are not controlled by a central authority. Instead, it works on a computer network all over the world, which makes it difficult to manage or control transactions.
- Accessibility : Anyone who has an Internet connection can use cryptocurrency, eliminating the need for traditional banking infrastructures and reducing transaction taxes.
- Transparency : cryptocurrency transactions are recorded on public LEDs called blockchain, which offer a transparent and resistant recording.
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Advantages of decentralized finance (Defi)
- efficiency : Defi allows faster and economic financial services than traditional financing systems.
- Liquidity : Defi platforms offer high liquidity, allowing users to quickly change the cryptocurrency for other Fiat activities or coins.
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- Innovation : Defi determines innovation in the financial sector, allowing new cases of use and applications that have previously been implemented.
Examples of decentralized financial applications (Defi)
- Loan platforms : Defi platforms, such as compounds and aaves, allow users to borrow their cryptocurrencies with much higher interest rates than traditional banks.
- Stablecoins : Stablecoins, linked to a coin or a Fiat resource, offers a precious stable shop, offering liquidity and access to financial services.
- Debt cards
: Defit of debit cards, such as the composed card, allow users to obtain interests on their hips, without having to manage a separate wallet.
Advantages for traditional finance
- Increase in efficiency : traditional financing systems can be slow and bureaucratic, while the DIFI platforms work in real time.
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- improved regulation
: traditional finances work in consecrated regulators, while Defi works outside of them.
Challenges and limitations
- Volatility : cryptocurrencies are extremely volatile, which makes users difficult to predict their value.
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