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DeFi and financial system: integration and changes


DeFi, or Decentralized Finance, are one of the new tools that are removing all the foundations of the financial system. During the TradeON Summit 2020 event, started this Tuesday, the importance of DeFi for a new form of exchange, loans and development was evaluated.

In the presentation How are DeFis changing the financial world? Quantum Economics analyst Pedro Febrero explained this new form of loans in depth. He also gave a review of the most important projects within this Ethereum platform.

Similarly, it is important to note that Decentralized Finance, according to February’s vision, is quite simple in nature. It is that “DeFis consist of receiving money borrowed from others or, on the contrary, lending money to others”.

Incorporation of DeFi in the financial system

During his presentation, Pedro Febrero, who has also been a collaborator in important technology news web portals, started with a review of the financial system.

In this sense, he explained that, within finances, DeFi have not simply adapted, but also that they are changing this system. In this review, he exposed the different phases of the financial system, from money as a store of value, medium of exchange and unit of account.

Likewise, the role of currencies, both those that represent a safe haven such as metals and Bitcoin, on the one hand, and fiat money, on the other. He then explained the point of finance, that is, development through interest on savings and credits received.

How are Decentralized Finance integrated?

It should be noted that DeFi have a similar function to that of banks. However, the difference is that, as its name indicates, they are decentralized and are open to anyone who wishes to use them.

This is one of the great differences between DeFi and the traditional financial system. In the latter, controlled by a handful of institutions, especially in the last two centuries, it is limited for select user circles. Thus, the vast majority of people have no possibility of entering it.

For its part, Decentralized Finance has a highly open quality for anyone who wants to be part of it. To start working with one of these applications, you only need to have access to the Internet network.

DeFi and the financial system are interacting and adapting to each other.
DeFi as part of the financial system, are adding large amounts of money in Blocked Value. Source: DeFi Pulse

Open networks and closed networks

On the other hand, February reviewed the importance of networks to understand the functioning of DeFi within the financial system. It should be noted that these are grouped into two categories: closed and open.

Centralized structures such as Facebook, Alibaba and others belong to the former. Similarly, in closed networks some decentralized structures such as Amazon or Hyperhelder are grouped.

In the other type of network category, open networks, decentralized structures such as Linux and Wikipedia are grouped. Also, there are other types of structures such as distributed ones. The most popular example of these is Bitcoin and other similar cryptocurrencies.

Some examples of usability

At this point, some examples of the usability of DeFi within the financial system are placed, explained by the author, as well as the project with which it can be used as a tool.

  • Stablecoins and decentralized reserve banks: DAO / DAI Maker.
  • Loans and credits: Compound.
  • Automated token exchange: Uniswap.
  • Synthetic assets and derivatives: Synthetic.
  • Lossless savings: PoolTogether.
  • Identity: uPort.
  • Infrastructure and tools 0x.

Data to consider

  • DeFi have the same function of credit banking. The difference is that, in these, anyone can participate. You just need internet access.
  • DeFi projects are accomplished through the Ethereum Blockchain network and its smart contracts.
  • The total of Value Locked in the DeFi, amounts to about $ 3.63 billion dollars.
  • The DeFi financial system is dominated by 27% by the Maker project, which has recently displaced Compound.

Reliable sources

The information in this content has been extracted from reliable sources detailed below.:

1- Professional handling of content by the authors of CriptoTendencia.
2- External sources:

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