The DeFi (Financial) EcoSystem

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What is the DeFi EcoSystem?
DeFi is short for decentralised finance. The DeFi ecosystem is part of the blockchain universe and will compete with the traditional finance systems. The new online economy can be seen as an emerging force. DeFi will increase the popularity of not only crypto currencies but other elements like central bank digital currencies, tokenised assets (digital gold etc.), real estate and energy.

We will now go through three core points that will help you further understand the DeFi Ecosystem: A. Basic Definition of DeFi, B. Why DeFi Began and Growth and C. dApps and their Strengths.

A. Basic Definition of DeFi
You will soon hear about the DeFi ecosystem. DeFi is short Decentralised finance. To understand DeFi you must also be familiar with CeFi. CeFi is short for “centralised finance“. CeFi is basically the traditional Approach to finance.

Elements such as “liquidity” and “match making with an authority like a bank or crypto currency exchange” are already solved with CeFi. DeFi then takes these elements and splits them up with it’s dApps. Three key benefits Of DeFi are security, cost effectiveness and the dApps themselves are more blockchain Ready than CeFi.

B. Why DeFi Began and Growth
I’ll admit that Bitcoin was the first to transport money and a new currency onto the internet. But experts say that DeFi will improve money movement and it will keep money working hard. Just like any normal currency benefits from being part of a financial system, any cryptocurrency will also benefit from being part of a DeFi ecosystem.

DeFi doesn’t just concern Bitcoin or other crypto currencies. In future years the DeFi eco system will include other elements like central bank digital currencies, tokenised assets (digital gold etc.), real estate and energy.

The DeFi eco system as it stands now includes two major elements of the blockchain Technology. These elements are “tamper resistant” and “ablility to interface with cryptocurrency”.

But how did DeFi get so big? Two words: Yield Farming. Yield Farming Is basically the art of maximising interest earned on a crypto currency. DeFi Apps of course assist in this process hence the DeFi eco system became popular for users. But note that Although the returns can be huge, the amount of risk you bear is also massive. But interestingly, DeFi is gradually catching up with the traditional financial system.

C. dApps and their Strengths
Now we will discuss the “dApps”. These DeFi apps interact with money without needing banks or other middle tier entities. Interestingly, the more dApps that are created and work with each other the more strong the DeFi ecosystem becomes.

There are already “swapping” dApps that are doing the rounds that help people trade with each other. We’ve seen these apps before right? Sure, but when you connect them to other programs they become much more powerful and the DeFi ecosystem also then becomes more powerful.

Cryptocurrency and DeFi work together using digital tokens. One such token includes the Staking tokens which provide another layer of security on top of the basic blockchain. Another interesting token is the “asset-backed” tokens such as real estate, gold etc. To invest in DeFi you can get the tokens you need from a Binance Smart Chain.

Quite simply, the more dApps that get created and interconnect the stronger the DeFi ecosystem gets and then of course end users reap the benefits.

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