Earnity On Understanding The Importance of DeFi In The Crypto Community

Crypto industry leaders, Domenic Carosa and Dan Schatt from Earnity believe one of the most critical topics in cryptocurrency is decentralized finance or DeFi. The goal of DeFi is to build an entirely new financial system that is wholly independent of the traditional financial (TradFi) economy. Billions of dollars fund this goal involving the efforts of thousands of developers worldwide.

The DeFi Ecosystem

DeFi is a cryptocurrency movement that is open to anyone globally. It depends on cryptocurrencies like ether. DeFi is a trustless application, meaning that a third party, like a bank or government agency, does not control nor host it. Instead, cryptography, smart contracts, and blockchain technology enable this decentralized finance system to exist so the global community can use it.

Borrowing and Lending in the DeFi Ecosystem

Lending and borrowing platforms have become an essential part of the DeFi ecosystem. Users can borrow against their crypto positions by locking them into a smart contract. Additionally, other users can lock their crypto positions into a smart contract and generate revenue by lending their coins to borrowers.

It’s worth noting that the yields generated by lenders in the DeFi ecosystem are significantly higher than those generated by the traditional financial system. Furthermore, because running an intelligent contract is much less expensive than running a conventional bank, nearly all the yield generated by lending money passes directly back to the lender via the smart contract. So, many people trust these transparent intelligent contracts, earning a lot of money from them.

Decentralized Exchanges

Developing intelligent contracts, stablecoins, and lending and borrowing platforms resulted in another significant development in DeFi: decentralized exchanges (DEX), another crucial component of decentralized finance.

Why is DeFi so important?

DeFi aims to create an open, trustless, and more accessible financial market. Significant development and investment have gone into the advancement of DeFi, and financial advisors must understand this space. Much of the DeFi technology builds on and improves the TradFi system, potentially resulting in a better outcome for users.