Decentralized Finance (DeFi) is the crypto philosophy, the same one that years ago encouraged a group of young people from around the world to develop a technology, the blockchain,Uniswap clone capable of decentralizing everything, especially the financial world, with the purpose of achieving one day the dream that everyone would be their own bank.
For the purchase and sale of cryptocurrencies, new applications or use cases are now being sought based on the different blockchain networks that have emerged in this advance towards the elimination of intermediaries. They are financial products similar in many cases to those provided by traditional banks, but eliminating intermediaries, reducing the payment of commissions and paying them to other actors, recording the transactions in smart contracts.
Its defenders argue in its favor the creation of a financial system that is fairer, more efficient, transparent, secure, resistant to censorship and that escapes the control of regulators and intermediaries. This is how it is understood at least by the Argentine programmer Juan Nuvreni who talks about it in a video on his Crypto Sheinix channel.
Miguel Caballero , CEO of Tutellus and author of the book ‘ Decentralized Finance for Restless People ‘, also shares this vision by adding the possibility, for the first time in history, Uniswap clone script of creating your own financial product and the derivative services you want. He also highlights the numerous business opportunities that are emerging around DeFi where, in just three years, it has gone from having zero euros locked (TVL — Total Value Locked) to having 200,000 million dollars. “This means that those 200,000 million dollars have left the fiduciary market and have been transferred to blockchain protocols because they find much higher financial returns in it,” explains Caballero.
Differentiating aspects of DeFI
Although linked to the crypto industry, within Decentralized Finance there are a number of factors that distinguish it. In DeFI, rather than talking about centralized exchanges , such as Binance or Coinbase, with a legal structure behind it, they talk about decentralized exchanges or protocols. That is, someone develops a protocol and everyone who acts through it does so completely anonymously. All operations are recorded through smart contracts .
Likewise, although most of the protocols that were initially created were made with the ethereum blockchain , there are currently numerous protocols outside this technology, which, in general terms, are more expensive than others.
Another peculiar note in the DeFi environment is the use of stable cryptocurrencies, stable coins, such as Tether or DAI, as the ‘cement’ of the protocol. This is done in order to avoid the volatility of cryptocurrencies in risk operations such as loans. To maintain their value, stable coins often peg their valuation to another external currency, either fiat, usually the US dollar, or another crypto currency, at a 1:1 parity.
Business opportunities
Based on these clarifications, Miguel Caballero lists some of the business opportunities that are emerging around Decentralized Finance.
One of the most popular at this time is lending or loans. It is based on a cryptocurrency investor linking their virtual wallet to a certain protocol and contributing the amount they want as a liquidity provider. Just by registering and making this gesture, you already receive commissions, that is, passive income for your assets, which will depend on what is stipulated by each protocol. On the opposite side is the borrower, the person who wants to receive the borrowed money but without risking the digital assets he owns just in case one day his price goes up. He withdraws the money he needs by providing a kind of guarantee, which is known in the environment as collateral, and when he pays off the debt, he recovers it by paying the established interest, generally the source of income of the creator of the protocol.
Neither the name of the lender nor that of the borrower appears anywhere, since they are registered with passwords, hence the difficulty for monetary regulators to keep track of this type of operation.
On the other hand, and so that no one can ‘get their hands’ in the distribution of commissions, the ideal is to establish what is known as DAO, the Decentralized Autonomous Organization that automates the process through smart contracts in a blockchain,Uniswap clone software thus guaranteeing the same conditions for both liquidity providers and borrowers. To support the operation of the DAO, a governance token must be created.
Another revolutionary use case with DeFi pointed out by Caballero is the possibility, for the first time in financial history, that everyone can create their own money, their stable coin, and establish the rules of its operation.
Other derivatives are the possibility of managing investment fund assets in a decentralized manner, investing in protocols to buy or sell assets or cryptocurrencies without going through a conventional exchange , issuing tokenized shares or financing projects collectively internationally. In this line, another of the entrepreneurial projects of which Miguel Caballero is a part is Reental, a startup specialized in the investment of tokenized real estate with which they plan to present the construction of a building in this way in the coming days in Valencia.
In summary, with DeFi we are talking about financial services that do not depend on third parties and whose management, protection and control depend on each one without depending on any trusted third party.decentralized exchange script The eternal dream of the crypto industry.
