Web3 and DeFi are two concepts that are becoming increasingly crucial for the world of finance and the internet, breaking further into the mainstream. The DeFi industry alone is worth over $100 billion, as of October 2021, an increase of nearly 900% since 2020.
Instrumental to the growth and success of DeFi is, of course, DeFi platforms, which aim to make DeFi and Web3 processes available to average users, as well as blockchain enthusiasts. These platforms are instrumental to the crypto revolution and its increasing accessibility.
What is DeFi?
DeFi, or Decentralized Finance, is a form of Web3 financial service that aims to democratize finance through peer-to-peer processes and sharing on the blockchain. A DeFi platform is simply an internet space which runs on and allows procedures for Decentralized Finance. It allows users to exchange, borrow, lend, and spend varying forms of cryptocurrency.
DeFi differs from traditional forms of finance as it allows the sharing and sending of data and money without third-party entities or private companies. Through the infrastructure of the blockchain, data can be exchanged and shared through direct peer-to-peer movements.
In this sense, DeFi is key to the Web3 revolution. It removes the need for infrastructure owned and maintained by large technology companies and financial institutions, and democratizes finance, placing financial power into the hands of average users and investors.
Therefore, it’s not surprising to see that DeFi platforms are experiencing a period of rapid growth, as crypto enthusiasts seek to expand their possibilities for using and owning crypto, and make the most of the Web3 revolution. Where so many financial processes, from holding money to borrowing money, are processed by third-party companies, DeFi platforms provide a viable and accessible alternative.
DeFi platforms are also important forms of infrastructure for the buying, selling, and exchange of NFTs (non-fungible tokens). Some platforms exist solely for the creation and trade of NFTs, while some may integrate NFTs with other DeFi use cases.
Benefits of a DeFi platform
Accessibility: Since DeFi platforms can be accessed without the need to be approved by any third-party entity, it is much more accessible to the global population, especially those that are typically shut out from finance or are unbanked. No data sharing, minimum fund balance, or credit score is required, unlike for large financial institutions.
Greater security: DeFi platforms grant users greater control over the security of their data and funds, since this is managed by the user, rather than third parties. Data on the blockchain is also encrypted, unlike forms of data held by private companies. Little personal data is required for DeFi platforms, unlike if one wants to open a bank account, for example.
Speed: DeFi transactions are processed in real time, and are therefore much quicker than transactions associated with traditional forms of banking and finance. Whereas large banking infrastructure will process information and transactions on average in 3-5 days, DeFi platforms will do so in minutes or hours.
International connectivity: DeFi platforms allow easier integration within the global financial space, by removing the fees and bureaucracy associated with traditional finance. Money and data can be internationally shared on the blockchain as it is nationally, with low fees and quick processing times.
Examples of DeFi platforms
There are a few different types of DeFi platform, each with its own particularities, purpose, and well-known examples:
Decentralized Apps (dApps): A decentralized app is a type of application that runs on the blockchain, rather than on a computer system owned by one organization or company. In the context of DeFi, dApps often allow access to financial trading and lending. Most dApps are run on the Ethereum blockchain, an easy and accessible resource for the building of more complex financial use cases. Examples of prominent dApps include Pancake Swap, OpenSea, and UniSwap.
Decentralized Autonomous Organizations (DAOs): DAOs are run on concepts of democratized finance, where token owners vote on important decisions, rather than these decisions being made by CEOs or boardrooms. DAOs are more about how the DeFi platform is run, so it’s possible to have a platform that’s a dApp and DAO at the same time. UniSwap and Compound are examples of DAOs.
Crypto exchanges: Exchanges are a form of a DeFi platform which allow users to buy, sell, and trade crypto, mostly in exchange for fiat currency or other forms of cryptocurrency. The largest crypto exchanges are Coinbase, Binance, and Crypto.com.
Chainswipe & DeFi
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