DeFi will be the future, why because instead of a traditional bank giving you “permission” to access a collateral loan or having full control of your money and savings you can just join a decentralized financial ecosystem.
Let us explain, traditional centralized financial services are now slow, non-trustworthy, have hidden fees also the controller of your cash and assets. With the likes of DeFi which stand for Decentralized Financial this old system will be change, now what does DeFi do?
Well give you 100% of control of your financial data, spending, sending and loans on the Ethereum blockchain which will make the traditional financial system more trustworthy and transparent. Furthermore, the technology of DEX will cancel out the middleman or custodian for financial exchanges unlike traditional trading the user usually don’t know their assets are coming from a middleman or a third party service that why the user pay a trading fee most of the time the traditional exchanges don’t even have enough collateral to cover mega size trades.
Furthermore, with DeFi you can trade, buy, sell and swap your cryptocurrencies with minimal custodial risk, with the blockchain technology your data will be safe and secured also keep 100% of control of your assets and minimize crypto swap fees. So for collateral how will DeFi be any different? Liquidity Pool Model what does this even mean instead of users borrowing directly from a custodian DeFi has a crypto pool holding all users assets so when a user wants to borrow from the pool; the pool will give you amount that is based off of your current holding on that DeFi exchange or DApp also canceling the need for a credit score and credit history and with a interest rate that is based off of supply and demand.
That’s not even the best part, DeFi money markets are completely transparent that translates to you can look up how many loans are active and how much collateral is in every crypto on that DeFi money market so you can know in real-time if that money market can liquidate your assets if you need to ASAP.
Lastly, DeFi amazing insurance allows users to buy their own insurance or provide insurance for interest on their crypto assets usually DeFi insurance acts as a safeguard for hacks,fraud, or bugs of the insurance is for crypto users to be more safe and secured.