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What are the benefits of DeFi?

The traditional finance model that we are familiar with is build on centralised authorities (such as banks) to process transactions and act as intermediaries. With DeFi, there are no middlemen. It's finance for the people, by the people.

Nov 2, 2020

Accessibility

Anyone with an internet connection can start using DeFi. In fact, the main barrier is usually getting money out of government-issued 'fiat' money and into crypto. Fortunately this is becoming even easier thanks to payment gateways, such as those available in Argent.

For people in countries where the banking system is underdeveloped, inaccessible, or tightly controlled, DeFi means access to banking-like services available instantly from a smartphone.

Ownership

Because the Ethereum blockchain is decentralised and community-run, there is no central authority who can block your transactions or revoke your account. You can always retain full control over your assets.

Autonomy

Because the Ethereum network is decentralised, it is resistant to being shut down by governments as every node has a full copy of the blockchain so they can validate transactions. This also means that the network is tamper-resistant, making it extremely hard for anyone to modify the transaction record (you would need to control 51% of all nodes to do this).

Transparency

While some traditional banks have been embracing the 'open banking' movement, the 'open finance' model is already built-in to DeFi. Every transaction is publicly visible on the blockchain, verified by other users.

One advantage of this is that there is less 'asymmetry' in information between market makers (pro traders) and everyday users. It's also easy to check how much a protocol is being used, and what the current loan rates are at a glance.

What's more, DeFi on Ethereum is built on open source code, so anyone can see how it works and built new platforms and protocols.

Innovation

Whenever you use DeFi, you are taking part in a global experiment that is changing the world of finance.

The 'money legos' analogy really works well to explain how protocols can build on top of each other to create a highly flexible financial system. Assets in DeFi take the form of tokens, which means they are readily traded and divided. Did you ever think it would be possible to own 0.043% of a real estate property?


Now that we have covered some of the greatest benefits of DeFi, you should also take a look at the potential risks, to better understand whether DeFi is right for you.

Ready to get started with DeFi?

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Related Articles

What are the risks of using DeFi?

DeFi offers attractive, high yield opportunties for investors, along with a number of risks that need to be considered.

How do I start using DeFi?

DeFi is not a token, a company, or a stock to invest in. It's a whole new financial system.

Where can I learn more about DeFi?

There are a lot of great resources out there for learning about DeFi, but it can be hard to track them all down. Here's some of our favourites!

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