Get to know DeFi, an Interesting and Popular New Blockchain Trend

Decentralized Finance or commonly known as DeFi has become a hot topic of discussion in the blockchain world around the world, Indonesia's DeFi coin is no exception. Basically, DeFi is a system that aims to provide open and transparent financial services.

Interestingly, DeFi offers an advantage where individuals and institutions can take advantage of wider access to financial applications without the need for a third-party intermediary.

In general, DeFi is an attempt to decentralize core traditional financial use cases such as trading, lending, investing, wealth management, payments and insurance on the blockchain.

In fact, DeFi makes it easy for everyone who previously did not have access to banking or financial services. With this technology, costs can be minimized and everyone on low incomes can also benefit from a wider range of financial services.

The backbone of all DeFi protocols and applications is “Smart contract”, which are small applications stored in a ledger that are run by multiple computers in a distributed network.

Profit from Smart contract is its high level of security, where this technology guarantees deterministic execution (deterministic execution) and allows any resulting state changes to be verified by anyone. Smart contract known for its high transparency and minimal risk of manipulation and intervention.

There are 5 main layers of DeFi, namely:

1. The settlement layer

Consists of the blockchain and its native protocol. This layer allows the network to securely store proprietary information and ensure any changes that occur comply with the rules set by the network.

2. The assets layer

Consists of all the tokens issued above settlement layer. This layer includes the native protocol assets as well as any additional tokens that are based on the blockchain-backed token standard.

3. The protocol layer

Provides specific standards for uses such as decentralized exchange, debt markets, derivatives and asset management on-chain. These standards are usually implemented as a Smart contract and can be used by every user.

4. The application layer

Create app user-oriented connected to individual protocols.

5. The aggregation layer

Create a user-focused platform that connects to multiple applications or protocols. Tools are usually provided for comparing and assessing services, allowing users to easily link multiple protocols together and combine relevant information in a clear and concise manner.

DeFi leverages a progressive set of tools to give users control. The fact that this DeFi trend offers extra functionality beyond reducing operational risk makes DeFi an ideal replacement for today's financial systems.

Then, what is the difference between Decentralized Finance and Traditional Finance?

Difference Between DeFi and Traditional Finance

• In Decentralized Finance, blockchain plays a major role in regulating all work in the financial sector. On the other hand, public governments that require laws and regulated financial institutions act as sources of trust that govern all activities in traditional finance.
• Decentralized Finance has attracted the attention of a number of people because its system is more open and transparent than traditional finance. Anyone can take part in creating financial services and tools on blockchain technology. On the other hand, in traditional finance, one must have a license and authorization from the authorities or regulators, thus limiting innovations in the traditional financial system.
• In Decentralized Finance, users can make transactions without intermediaries, so the process will be faster and easier. This means that DeFi also requires lower costs compared to traditional finance

From the points above, it can be said that the presence of DeFi can bridge the existing gap and allow the financial industry to be enjoyed by all people, everyone without any limitations. DeFi opens up great opportunities for users to access several financial instruments without any restrictions on age, race, religion, nationality to geographical problems.

After knowing the definition of DeFi and the differences, what are the uses and benefits of DeFi itself?

Uses and Benefits of DeFi

Open to Anyone

The main benefit is that DeFi technology allows people who previously did not have access to financial services to participate in the global economy.

Based on data from the World Bank, 1,7 billion people in the world (or 1 in 5 people in the world) do not have a bank account. That is, they do not have access to bank accounts. By not having access to financial services, these people certainly have no credit score.

Even though this credit score is very important and is sometimes needed to open a bank account or make a loan. DeFi allows people to easily access a wide variety of financial services.

Access to Other Forms of Capital

In Decentralized Finance (DeFi), everyone does not need to receive capital centralized by the government. DeFi provides an alternative for everyone to store their assets in another stable form. For example, we do not have to save funds in Rupiah, but can be in the form of USDT (USD Tether) which is equivalent to the US dollar.

Easy Access

Not only DeFi users can benefit from this technology, but many of the creators of financial products are also starting to build the next generation on top of DeFi.

One of the main benefits of DeFi is that most protocols, such as Ethereum, are open source which means it can be accessed and used by anyone, for his personal projects.

Anyone with internet access can create DeFi DApps. So that it is not only a financial service product that is open to its users, but also to its owners.

High Level of Transparency

In DeFi, all information is easily available and can be accessed openly. This system believes that a lack of transparency can reduce a person's accountability and motivation to do things responsibly.

Minimize Cost

DeFi can reduce transaction costs because there is no need for intermediaries in each of its services.

Currently, DeFi Can Also Be Used For:

Loans

It is one of the most popular types of apps from the DeFi ecosystem. When compared to traditional credit systems, transactions borrow-borrow in DeFi can be done instantly and there is the ability to guarantee digital assets without credit checks and there is potential for standardization in the future.

Banking Monetary Services 

These services can include the issuance of stablecoins, mortgages and insurance. The price of crypto assets is considered to be volatile very quickly. This is because of technology smart contracts which can significantly minimize time and cost.

With various benefits and uses that make it easy for users, DeFi's popularity is also increasing in Indonesian society. This has also prompted Tokocrypto, as one of the largest growing exchanges in Indonesia, to launch the first local DeFi project in Indonesia, namely Toko Token (TKO).

Indonesia's First DeFi Initiative Token Shop (TKO)

Officially launched on Wednesday (31/03/2021), Token Shop (TKO) which is the first local crypto asset project in Indonesia with the aim of providing convenience to people who do not yet have access to banking service facilities. In addition, TKO also offers a hybrid token model that combines the advantages of CeFi and DeFi and is built on top of the Binance Smart Chain.

Besides, at the time of its release. The presence of TKO received a very positive response from the public, as evidenced by the soaring price of TKO when it was first listed on Tokocrypto by 3000%.

How? Already understand about DeFi right? With the many positive sides that DeFi brings, it's no wonder that this blockchain system is gaining popularity quickly. And for those of you who want to support and participate in the first local DeFi coin Indonesia project, you can really get it HERE! Greetings to the Moon!

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Disclosure: This article was first published on the channel Tokocrypto News