What is DeFi (decentralized finance)?

The technological progress of the recent years is speeding up its development, also due to the pandemic of Covid-19.

Whether we are talking about services, softwares or hardwares, the new technologies are actually helping the economy in such a rough period, for both the health and logistics sectors.

DeFi, the decentralized finance, is finding a fertile ground in this scenario.

The world of the economy is embracing this evolution heading to a decentralized system where to manage financial movements, purchase instruments and trade. Thanks to the internet connection
and with no need of involving intermediaries, it is possible to access innovative financial services.

How does the decentralized finance work? What is DeFi? What are the advantages for traders? Let’s find out with this article from the Moby Dick Academy.

What is DeFi?

DeFi, or Decentralized Finance, is a financial system based on the world of cryptocurrencies.

It aims to offer traders all the financial services available at classic banks, without the presence of an intermediary.

Its system is based on the blockchain and on the use of smart contracts.

Therefore the costs of accessing each service for your wallet are lower than those of the traditional banks and they change depending on the blockchain used.

From the exchange of FT or NFT to the digitised assets, DeFi allows many operations in just few clicks.

This new frontier is taking its first steps today, while it is already shaping the direction of the market.

In addition to this, the security of the execution of traders’ movements is guaranteed by the peerto-peer services performed through the public blockchains or through the complex network of
computer nodes.

Advantages of DeFi

But what are the advantages of DeFi? Among the numerous benefits you can count the following ones:

  • The ease of access by opening a DeFi Wallet in one of the many software available – the so-called DApp (decentralized app).
  • There is no need to ask a third part to open an account on your own name.
  • Transparency is another fundamental feature, since all those involved can follow the operations that are being carried out. It is difficult for a private company to offer such a level of transparency.
  • Unlike traditional stock markets, those in DeFi move much faster, almost beating the second.
  • Also, the offers are much easier. The transactions are flexible and fast, with sustainable costs due to the absence on any intermediary.
  • A real name is not required and a pseudonym can be used. This preserves your privacy in a system that still protects traders.

Disadvantages of DeFi

As in any financial system, which manages economic resources, there are disadvantages.

Among them, the greatest advice we can give you is to always pay attention to the volatility of the chosen market projects.

Each software, being a new technology, has its own usage metrics. So comparing services on the market is always a good thing to do.

Some operations in DeFi can be expensive if not properly checked and, finally, be careful about the projects you intend to follow and their long-term outlook.

Learn more about the Moby Dick project and the online trading software Pequod.

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