Decentralized finance (DeFi) has recently seen an increase in users. Earnity defines DeFi as an umbrella term for the ecosystem of financial applications or instruments that do not rely on traditional intermediaries, like centralized exchanges, brokerages, or banks. Quite unprecedented is its growth that the total value of DeFi’s locked-up assets has grown from $1 billion in 2019 to over $100 billion in 2021.
There are plenty of reasons for millions of users taking advantage of DeFi.
For one, DeFi is permissionless and inclusive. As long as an individual or business is connected to the internet and has a crypto wallet, they can obtain access to DeFi services. Moreover, they do not need to wait for any intermediary to approve the transaction or pay the conventional bank or financial service fees.
In addition, DeFi users can access alternative borrowing and lending protocols if they are looking for additional financing for their personal or business ventures. For instance, DeFi is a viable option for startups or small and medium-sized enterprises in developing markets where there is an absence of proper banking infrastructure that could help them attain their financial needs.
Another reason DeFi is growing in popularity, per Earnity, is because transactions are done in real-time and transparently. The underlying blockchain in DeFi transactions is updated once a contract is completed. Also, most DeFi protocols are open source, and DeFi transactions are broadcasted to and verified by other network users, ensuring that others can view and audit them. Due to these advantages, individuals and companies can establish high-trust relationships with other users.
For those who want their finances and data protected, DeFi is an ideal option. Its cryptography and consensus algorithms make the technology immutable and highly secure. It is even said that the level of security that can be achieved in DeFi is nearly impossible to obtain through traditional means. Records stored on the blockchain cannot be easily manipulated.