Will Traditional Finance be replaced By Decentralised Finance?

Decentralized Finance (DeFi), which has the potential to replace traditional finance, represents a major transformation in the financial sector. In this article, we will examine the effects, advantages, challenges and possible future developments of DeFi on the traditional financial system.

Entrance

Traditional finance is a system that has a long history and is generally managed by centralized organizations. Banks, insurance companies and other financial institutions form the basis of financial transactions. However, this system faces problems such as high transaction costs, low financial inclusion and limited access. This is where DeFi comes into play.

What is DeFi?

Decentralized Finance is an ecosystem that aims to provide financial services without central authorities using blockchain technology and smart contracts. This approach aims to overcome the limitations of traditional finance by making financial transactions more transparent, reliable and cost-effective.

Advantages of DeFi

1. Low Transaction Costs

DeFi provides low transaction costs by eliminating intermediaries and automating transactions by smart contracts. This offers users access to financial services at more affordable prices.

2. Global Reach

Traditional financial systems are often subject to geographical limitations. DeFi, on the other hand, is open to participation by anyone with internet access, which allows the creation of a global financial system.

3. Transparency

Blockchain technology ensures financial transactions are transparent and traceable. All transactions can be verified and recorded without a central authority.

4. Irrevocability

Transactions made with smart contracts are recorded as immutable on the blockchain. This provides strong protection against financial tricks and fraud.

Challenges of DeFi

1. Security problems

DeFi projects may be subject to security issues due to software bugs or vulnerabilities in smart contracts. This means user assets may be at risk.

2. Lack of Regulation

Traditional finance is subject to strict regulations. However, DeFi faces uncertainty as there is no clear regulation in this area yet. This may make it difficult to protect investors and users.

3. Adoption Process

DeFi adoption means users must change their habits and gain trust in the new technology. This process can take time and involves many challenges. Competition between DeFi and Traditional Finance DeFi's competition with traditional finance requires evaluating the advantages and disadvantages of both systems. DeFi's innovative features can also offer valuable learning and adoption for traditional financial institutions. This competition can contribute to better services and solutions in the financial sector.

Collaboration of DeFi and Traditional Finance in the Future

A competition as well as collaboration between DeFi and traditional finance is possible. By leveraging the benefits of DeFi, traditional financial institutions can improve their services and create a more effective financial ecosystem. This collaboration aims to combine the strengths of both parties and build a more sustainable future in the financial sector.

Conclusion

The competition and collaboration between traditional finance and Decentralized Finance represents a significant transformation in the financial industry. While the advantages of DeFi offer solutions to the weaknesses of traditional finance, it also faces challenges such as security, regulation and adoption process. However, both systems can learn from each other and combine their strengths to create a more effective structure in the financial world. In the future, this evolution in the financial ecosystem may provide users with access to better services and broader financial opportunities.

      After talking so much about DeFi, it wouldn't be possible without talking about DeFi coins and tokens.  I want to talk about this briefly

What are DeFi tokens?

Cryptocurrencies of DeFi platforms are called DeFi tokens or DeFi coins. Uniswap (UNI), Sushiswap (SUSHI), NEAR Protocol (NEAR), Cardano (ADA) and Aave (AAVE) are the prominent cryptocurrencies in the list of defi coins and defi tokens. But there are more than these cryptocurrencies in the list of defi coins.
Largest Defi Coins and Defi Tokens by Market Cap
Examining the list of defi coins and defi tokens shows that certain cryptocurrencies are growing quite fast relative to their market cap. The largest defi coins and defi tokens by market cap are:
Uniswap
sushiswap
Near
Cardano
AAVE
It is among the largest defi coins and defi tokens by market value.

Uniswap (UNI)


Uniswap is a decentralized, open source cryptocurrency exchange running on the Ethereum (ETH) blockchain network. UNI token is an ERC-20 based governance token that allows users to have a say in the management of the Uniswap decentralized exchange.

Sushiswap (SUSHI)


Just like Uniswap, Sushiswap is a decentralized cryptocurrency exchange. In fact, Sushiswap was created by modifying the Uniswap project and is defined by its founders as an advanced version of Uniswap. ERC-20 based SUSHI token is the native cryptocurrency of the platform.

NEAR Protocol (NEAR)


NEAR Protocol, created by NEAR Collective, is a blockchain project designed to enable decentralized applications to be created. The native cryptocurrency of the NEAR protocol is the NEAR token.

Cardano (ADA)


Cardano is a flexible, sustainable, scalable blockchain project on which smart contracts can be created. The native cryptocurrency of the Cardano platform is ADA token.

Aave (AAVE)


Aave is a DeFi project that enables peer-to-peer borrowing and lending without decentralization, without intermediaries, and with fixed interest rates. AAVE token is Aave's ERC-20 based native cryptocurrency running on the Ethereum (ETH) blockchain.

Resources

https://www.eternitylaw.com/news/what-is-defi-decentralized-finances-concept/?gad_source=1&gclid=EAIaIQobChMIpcSD3fLPgwMVSJJoCR1H3QIxEAAYAiAAEgKn4_D_BwE https://www.investopedia.com/decentralized-finance-defi-5113835#:~:text=Decentralized%20finance%20(DeFi)%20is%20an%20emerging%20financial%20technology%20that%20challenges,peer%2Dto%2Dpeer%20transactions. https://www.forbes.com/advisor/investing/cryptocurrency/defi-decentralized-finance/

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