What is DeFi in crypto world? A complete guide from DeFiWalletSwap.com

Thanks to the intervention of DeFi or Decentralized Finance. This financial system includes digital assets, protocols, smart contracts, and dApps, made with the famous blockchain technology.

The instability of cryptocurrencies has always remained the number one reason to minimize adoption and prevent them from being considered a true alternative to displacing traditional finance. However, with DeFi on the market, it moves into what looks like the ultimate anchor of digital assets in the global economy. Let’s try to understand what is DeFi in the crypto world.

Traditional financial system:

The traditional financial system is governed by banks, the “place” where everyone deposits the money they earn from their work in a savings account to make that money grow through an interest rate. However, while your money is in the bank, it will be used to invest in large international funds that generate enormous returns for said company.

Have you ever wondered why you can't take all your money out of the bank like it was nothing? Precisely because the bank uses it to multiply its reserves, together with the interest on loans and credits, makes the banking business one of the strongest globally. Something cool for traditional financial companies, not so much for users who not only have no control over their fiat but are at risk of the value of their savings falling if the country suffers from inflation. Even in a stable economy, the interest earned on a regular savings account isn't the most impressive.

To give people power, cryptocurrencies were created, digital assets that are not governed by a specific national economy and do not need an intermediary. However, these are not detached from the traditional financial system, since most need intermediaries (which are centralized platforms and projects) to make changes or save them in your digital portfolio. This is where DeFi comes in to change the landscape.

DeFi's contribution to freer trade:

Imagine a system where the user has total control of their operations, where they do not have to deposit their money in a bank or pay or collect through intermediaries, a secure platform with inescapable smart contracts.

Yes, this is DeFi and its ecosystem seeks to give flexibility and guarantee to those who use it. How is this achieved? Open source and contracts are fulfilled automatically when there is an agreement between two or more parties.

Within DeFi you have tools and services that you can combine and modify according to your needs. Currently, the best platform for decentralized finance is Ethereum, which offers a framework to fit it.

This cryptocurrency has high reliability in the market, even more than bitcoin, since its platform advocates total control of the user, without anyone being able to defraud another. Its operation has been effective since 2015, the year in which it was created. As if this were not enough, the release of version 2.0 is expected soon.

Bitcoin in a deadlock?

Bitcoin is the cryptocurrency with the highest value compared to fiat money, however, these first few months it has stagnated or stabilized at around $9,000. The thing that rise of DeFi has not changed since this instead of generating a positive impact has made bitcoin have fewer transactions and repercussions since it is considered a cryptocurrency of high savings or investment, rather than one of the fast transactions and unlimited.

However, this deadlock where Bitcoin is located will not last for long because although the ideal DeFi platform is Ethereum, the main cryptocurrency is and will be one of the most important tokens to trade. It is a matter of time for the bubble to burst and increase its price, so it is the ideal time to exchange your FIAT currencies for bitcoins on a secure platform.