The cryptocurrency challenge: week 2 Diving into DeFi

To understand what is DeFi and why we need it we must first understand the concept of centralized finance.
A centralized system of financing wold typically involve a bank.

Banks are those typical brick and mortar buildings. Sorry for using such a cliché to start my interpretation.

I use this line to emphasise that they are old fashioned (well relatively as compared to DeFi) and need a lot of Id verification, Documentation KYC & AML to get started with.
They are into savings lending borrowing and other such operations.
A common joke circulating about banks is that to take a loan from a bank ...

You first need to prove that you do not need the money

What this means is that the bank would ensure with all kinds of verification and collateral are in place so that it can ensure that you have the means to pay back.

What’s DeFi in your mind and have you ever bought any DeFi tokens?

DeFi on the other had comes with flexibility.
To start with there is no central authority like a bank to first judge you before they offer their services.
As compared to banks or CFI (centralized finance) they may need no or little documentation.
An important thing that makes DeFi stand out is the lower threshhold of entry point.
This is possible as DeFi deals with crypto so technically speaking it is possible to borrow smaller sums of money like $10

What makes you excited about DeFi?

Since Defi implementation is by way of operating a network or mesh of computerized nodes one can take advantage of the services of a decentralized financial system from anywhere.
There are no geographical restrictions and boundaries to shut you out of its services unlike a centralized bank which serves the persons in a region or country.

Which project do you think is the best DeFi application？Why?

Currently the DeFi space is buzzing with activity and a lot of projects are very interesting if you want to enter as an investor.
Most of these projects are ethereum backed and as a result require a lot of gas fee to be paid.
This fee is a function of the price of ethereum. Higher the price higher the gas and the transaction fee.
As a result one needs to wait for the time of the day when the gas fee is low and the ethereum network traffic is less.
I first came to know about celcius as a defi platform. It gained traction as a platform which gave crypto loans with crypto collaterals so you give your crypto as security and borrow against it.
The current hot favourite for me is the Leofinance token Leo and its ethereum wrapped version wLeo
For me a DeFi project gets classified as a favourite if it should give a good opportunity to get in.
The trigger for the Leo token is that it is being wrapped and the wLeo token is being created.
This means it is now an ERC-20 token in the ethereum ecosystem.
Like any ERC-20 token it can be traded against ethereum.
What makes it really exciting is the fact that it can be used to provide liquidity to the liquidity pool.
In this process it would earn you liquidity pool rewards.
If this is not a good enough reason then to make things more exciting the leofinance.io is going to airdrop from a pool of 300000 Leo tokens to those who provide liquidity.

What’s the mechanism of DeFi or any DeFi project?

The way De-Fi operates is that money is made to move between person A (the lender) & Person B (the borrower) and the movement is governed by a smart contract.
This smart contract is a piece of software code that ensures that all the collateral's and predefined requisites for the safety of funds and execution of the transaction as per the terms of the agreement.

Are you feeling positive or negative about the future of DeFi?

I am very excited about the DeFi space as it is rewriting the future of finance.
The idea of a financial institution should be to provide money who need it however traditional centralized financial institutions have too much paperwork and a lot of intermediaries.
This results in delays , increasing the cost of transaction and no financial services can be provided to those who are unbanked or do not have access to banking services.
DeFi changes it all. No mater where you are and what ever your nationality ,caste, gender religion or creed you are free to used the DeFi products and services.
Another important factor that is very exciting is the idea of microfinancing.
Fnancial transactions that are not viable to be carried out by traditional banks can be executed by DeFi systems.
This also brings focus to non ethereum based DeFi projects like $SUN from Tron and Justin sun look interesting.

Final thoughts

DeFi is an exciting space where a a lot is happening. Some projects are doing well and a lot of these are being used as templates to create clones.

So a lot of this is still experimental. One needs to be careful and cautious.
Do due diligence and research before putting your money here.
As long as you do research and invest wisely you are good in this space. Also do not invest more than what you can afford to lose.

This is my submission for Steem Crypto Challenge Month #2 : Diving into DeFi by @steemitblog @steemcurator01, @steemcurator02 .
https://steemit.com/steemcryptochallenge/@steemitblog/steem-crypto-challenge-month-2-diving-into-defi

Hats off to the Steemit team that is working so hard and doing great work to bring such great challenges.

This post is published with 100% Power up