Our second question for the week is pretty straightforward — what is the future of DeFi?
To answer that question, we must start by defining what DeFi is.
DeFi stands for Decentralised Finance. It’s a growing sector of the cryptocurrency world. DeFi is designed to be the new standard for how a financial system should work — democratic, fast, and secure. DeFi applications allow users to borrow, lend, and trade digital assets on a decentralised distributed ledger called Blockchain by using smart contracts to eliminate intermediaries. This means that there is no central authority controlling these activities — they are managed by the users themselves interacting with the smart contracts. Smart contracts are programs that automatically execute transactions when certain conditions are met.
DeFi is still in its early stages, but it has already seen explosive growth. In 2020 alone, the Total Value Locked (TVL) in DeFi protocols grew from $1 billion to $13 billion. This rapid growth is due to the many advantages DeFi offers its users. For instance, almost all DeFi protocols offer cheaper and faster transactions than the current financial institutions. They also offer more transparency and security, as users can control their funds without trusting a third party.
The future of DeFi is unarguably promising and beyond imagination. As DeFi grows, many innovative applications and services will spring up. DeFi is poised to play a significant role in the future of finance. It can revolutionise how we interact with financial instruments like transactions, trading, insurance, investment, derivatives, etc.
Disclaimer: The opinions expressed in this post are that of Surehive and should not serve as the entity of what you should know about DeFi. Neither do they serve as financial advice.
