Defy(ing) The Traditional Finance System
Abstract: The DeFi industry is taking the world by storm and it is changing conventional practices mainly because it bestows power to the people. In the years to come such democratization and decentralized structure of the ability to influence actions will become the norm. The sector of human endeavour that will therefore remain relevant will be that sector that is completely devoid of the traditional unitary approach.
As of the time of this writing, the Decentralized Finance (DeFi) market is worth 71.36 billion dollars. Just over a year ago, it was just 1.5 billion. Imagine what it will be in 5 years time. It is already defying the norm and setting the pace as a major disruptor within a disruptive ecosystem. It is putting much more power in the hands of the people, something that is strange to traditional finance.
When email emerged, it confronted the postal system and knocked it out. When computers came on the scene, it displaced the typewriter. And for DeFi , it is defy(ing) and redefining how traditional finance is done. It is indeed giving power to the people.
The cryptocurrency market may have taken a decline in May and June, but the prospect of what is possible in this space makes the heartbeat with serious palpitations. The plausibility of traditional banking losing their customers to the Defi space is very high. The major reason being its highly centralized structure and practice.
Blockchain Technology is at the core of the major changes happening in the world today. From the medical field, to real estate, gaming, gambling, entertainment, and global financial systems, all of which have gotten a taste of Decentralized Finance. Developers are looking at the shortcomings of the world’s systems as we know it today and are diving into the ocean of possibilities to search for nuggets on how a refined way of engagement can be secured. They are daily exploring better and easier ways of solving problems by simply prioritizing the people for which it is meant and giving them a huge chunk of power on the trajectory of developments. This is usually done through a voting system based on the number of tokens each community member possesses.. The community can choose what they want to change or get improved.
According to Kenneth Rapoza, a contributor in Forbes Magazine,
“ DeFi creators want to cut out traditional banks and brokers, allowing for the potential to facilitate faster, cheaper, financial transactions, all day every day, with no minimum transaction amounts, no paperwork, full transparency, and auditability.”
One of the shortcomings of traditional banking is its limitations in terms of duration and huge dependence on labour. As such, you cannot be certain of immediate response to your queries until there is a physical appearance in the office or banking hall. It is not fully automated, unlike DeFi where the system is live 365 days of the year. No public holiday. No weekend breaks or religious celebration breaks. Simply because it works based on smart contracts. Everything is pre-coded.
Another important area of defiance is in the place of unlimited transactions . Traditional banks usually would put a cap on the amount of money you can transfer per time. With DeFi, it is according to your capacity. It is how much you are willing to add to the system and in some instances, you determine what your interest rate is. Traditional Banks will dictate how much interest accrues to you. You rarely have a say in that regard.
Another point of divergence is the transparency of DeFi. Everyone can access the blockchain to see for themselves the hourly, daily, weekly or monthly transactions on the go and at any time. You can see how your investment is growing in real-time and that secures your confidence in the system. The traditional financial system is set up in such a way that books can be skewed to favour the company and evade the regulator’s hammer. Stories abound of how Chief Executives of these financial institutions are held responsible for mismanaging investors’ funds. DeFi is tackling this via its transparency feature.
These various developments show that there is real demand and a product-market fit for DeFi. One thing that cannot be disputed is the growth of the DeFi market, and as it stands now it is grossly undervalued. What does that tell us about this ecosystem? Opportunities! Will you position yourself for the opportunities that abound? The ball is in your court.
Join the International Council of Registered Blockchain Professionals (ICORBP) and align yourself with the possibilities in this space. Join our social media platform to be inundated with the relevant information.
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Samuel Bright (M.A) (A.B.F)
Editor at The International Council of Registered Blockchain Professionals (ICORBP)
#Defi #ICORBP #DefyingNorms