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2021-07-27 14:48:08
Can Decentralized Finance (Defi) Replace Traditional Finance Investments in the Future?
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The decentralized finance (DeFi) ecosystem is one of the fastest-growing sectors in the blockchain world since its launch in 2018. While the COVID-19 pandemic and governments stimulus programs clearly played a part, it is the inherent utility of these platforms that have kept it alive despite the May 2021 crash across crypto markets.
During its short lifespan, DeFi has grown from blockchain-based financial experimentation products to a multi-billion ecosystem with a complex array of platforms offering users borrowing, lending, saving, and bank-like transactions directly without any intermediary needed. In simple terms, DeFi products such as Compound, Uniswap, AAVE, and Yefi.one are enabling users to create peer-to-peer banking systems.
Replacing the traditional banking systems
The decentralized ecosystem exponentially grew over the course of 2020 and early 2021 on the back of poor monetary policies by governments and lack of financial inclusion especially in traditional insurance, banking, and investment sectors. According to DeFi Pulse, a DeFi aggregator platform, the ecosystem currently has over $64 billion locked in complex products, representing nearly 100X growth since the start of 2020.
Crypto market trading was a popular way out for inventors locked in traditional financial assets. However, investing in cryptocurrencies is highly dependent on market volatility. This means in times of consolidation or during a bear market, many investors enter into temporary losses.
DeFi offers a safer and less risky pathway for liberation providing passive income streams to investors by simply staking, providing loans, liquidity, or voting in governance protocols. One such protocol that combines several utilities of DeFi in a simple-to-use platform is Yefi.one, which launched at the height of the DeFi boom in 2020.
How Decentralized finance is changing finance
At launch, Yefi.one simply offered decentralized data storage to its users before expanding to the decentralized finance universe. The developers and founders aimed to solve the problems in traditional finance including high transaction fees and slow processing. But as with any transformative technology, the platform gave rise to new types of financial products and services. This changed the way people manage their assets, borrow and lend money, and trading on the platform.
Yefi.one is a budding DeFi product built on Binance Smart Chain (BSC) that offers staking and governance, providing one of the most profitable and attractive ways to earn passive income. Via its YeFi DApp, a fun, and interactive tool, users can earn up to 80% interest against their staked crypto assets which would otherwise be “interest less” if stored in other wallets or in the bank. During its short lifespan, YeFi DApp has already amassed over 10,000 customers globally.
The platform offers users a simple-to-use staking platform and high yielding APY rates on a highly secure platform.
Notwithstanding, YeFi.one also offers decentralized file storage services aiming to compete with top platforms such as Filecoin. Staking on decentralized storage solutions offers extra utility to the platform hence users are rewarded more than normal staking platforms. For example, staking on DDS projects such as YeFi offers 1.5X higher APY rates. Additionally, you can stake a number of coins including BTC, ETH, USDT, BNB, and YTA, and earn extra interest and rewards.
Risks of decentralized finance
Despite offering an alternative investment route for financial investors, staking platforms still lack in security and regulation assurance that traditional banks offer. As such, many staking platforms face several hacks and security attacks, whereby attackers find loopholes in the smart contracts and steal from the platform. This causes losses to other users on the platform or the collapse of the platform altogether.
To eliminate these cases YeFi.one employed the services of two blockchain-based audit firms, Beosin and CertiK, to ensure there are no exploitable loopholes in the smart contracts. Notwithstanding, the comprehensive audit has been performed against 13 different security indicators, including code specification, business security, DDOS attacks, function call, etc. So far, no exploits have been detected on the YeFi DApp showing it’s 100% reliable and secure.
A clear path for the future
As shown with the DeFi protocol above, decentralized finance could be a few steps from replacing the legacy financial systems today. The latter needs solutions to its high fees, long transaction times, and low APY rates and DeFi is ready to provide them.
Banks and financial intermediaries also pose a problem in the centralization and control of your assets. Once you save money in the bank or invest through an intermediary, you need to trust blindly that they will take good care of your assets. Remember the 2008 banking crisis and Lehman Brothers clients? There’s never 100% assurance that the bank will take care of your assets.
Decentralized finance platforms ensure that your assets are in your wallet at all times and you have full control at any time. In this new ecosystem, every asset owner will have full control over their asset. The users will have full access and there is no intermediary control. Any DeFi platform, such as YeFi.one - an open-source and decentralized platform - allows staking and exchanging of assets on the peer-to-peer platforms giving you real decentralization aspects.
Conclusion
All in all, decentralized finance products are still in their budding stage but have shown promise in giving financial freedom to investors across the globe. As more platforms and investors join the ecosystem, the traditional banking and financial industry will slowly be swallowed - trillions of dollars expected to move to DeFi.
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