Decentralised finance (DeFi) covers a wide range of areas, from remittances to derivatives and investments, but its most promising sector involves credit and lending.
Simon Chandler at Cointelegraph explains why: “thanks to the openness, security and transparency of blockchains, it’s possible to make loans and credit available to a larger pool of people than ever before, while the interoperability of blockchains opens up the possibility for creating a spectrum of new lending products and services.”
However, he does point out that DeFi still needs to put in plenty of work before it can compete with legacy financial systems. Moreover, users need to be careful when using early stage and untested DeFi platforms and services, just as they need to be aware that not all DeFi systems are truly decentralised.
What is DeFi?
DeFi is a relatively new and ill-defined term, but its meaning is simple: it refers to the use of blockchains, cryptocurrencies and/or smart contracts in providing financial services to clients.
Examples of DeFi platforms specialising in loans are MakerDAO, Dharma, Cred, BlockFi, Lendoit, SALT, Nexo, NUO, ETHLend, Colendi and Bloqboard.
Bloqboard lets users borrow or lend a range of crypto assets on the Ethereum blockchain. Its dashboard is fairly simple, with visitors being able to choose to borrow or lend any supported crypto and with them being presented with the variable interest rate they’ll benefit from or have to pay.
Nick Cannon, Bloqboard’s head of growth, told Cointelegraph that transparency is a big part of the reason why decentralized lending and DeFi more generally is likely to take off: “DeFi brings magnitudes greater accountability and transparency to investors making for a healthier financial system. These products will broaden access to sound financial investments no matter what geography you reside in.”
Guillaume Palayer, a co-founder of decentralized crypto asset management platform Betoken, commented that decentralised finance will also bring the benefit of greater security for users and their funds: “The main advantages are the control, security and permissionless nature offered for the end users by DeFi products.” He added, “Permissionless because everyone can access it without conditions and independent of your local financial system’s health. Security and control because the vast majority of DeFi products are non-custodial and offer the option to opt-out of their service with a simple transaction.”
He concluded by saying, “I’m very confident about the tremendous ecosystem’s growth we could witness in the next coming years.”