THE FUTURE OF FINANCE

Decentralized finance or DeFi is a popular term that has been used by financial advisers and crypto enthusiasts about a new technology that completely will take over the global financial system we use today. This is an emerging technology and as the name implies, it's main goal is to totally eliminate the intermediaries and middlemen such as banks and other financial institutions allowing people to make financial transactions through peer to peer financial networks, hence the name 'decentralized' as all the financial records are stored in a database that is accessible to anyone, similar to the blockchain.

With this, anyone can lend, borrow, trade and even store cryptocurrencies and other 'coins' using a software that records and verifies all transactions in the databases. DeFi is definitely a great technology it eliminates the third parties like banks which means little fees, it also enables for more transparency in the finances entrusted in the Defi networks.

DeFi vs CeFi (centralized finance)

Like the few points i mentioned above, the main advantages of DeFi is seen when compared to the opposite counterpart, CeFi.

In centralized finance, money is held by banks and third parties that facilitate money movement between parties with each charging fees for using their services while in DeFi, there are no third parties and the transaction is done by peer 2 peer technology with little or no fees.

In centralized finance, some transactions are limited to your geographical location and take a lot of time to process while DeFi's main goal is to reducing transaction times and location restrictions.

In centralized finance, people have little access to all thier finances and have little control over them and how they are used while DeFi gives people more access and control over thier wallets and trading services.

DeFi works use the blockchain technology that cryptocurrencies use which on is own is particularly secure and decentralized with peer to peer (P2P) technology but this is when the problems start to come. This technology makes it less easy for regulation and accountability and this will be a very big disadvantage because of this, DeFi is not really a safe investment as there is no structure in place in cases of fraud and financial irresponsibility which gives little or no guarantee of returns in case of emergencies and in recent months, these problems have started to be revealed with the failed or fraudulent DeFi networks.

Although DeFi is just an emergency technology with constantly evolving regulation and practices, and this itself is a major problem. Because DeFi is a relatively new technology, it is very complex and not easy to understand hence, many people are not well

Informed about the big risks of DeFi and this have been exploited by scams and fraudulent networks off people's finances and because of little regulation, there is very little guarantee of a refund of returns and also, DeFi is a highly volatile and unstable in prices for trading services.

With all of these advantages and disadvantages of DeFi, It's left for people to balance the pros and cons. And since it is still at its early stage we shouldn't just follow the hype but be well informed about the risks and benefits of this emerging technology.

In the world of finance, this new technology is being embraced by a large number of people especially the younger generation most being crypto enthusiasts and this is because of it's main goal which is to challenge the global financial system and eliminate traditional financial institutions to simplify and digitalize the financial system.

In conclusion the bottom line is that although there is still much skepticism about this new technology it is here to stay and as the world is moving towards more innovations and digitalization, we may end up with DeFi as the new global system of finance.