DeFi (Decentralized Finance) is common among NFTs and Cryptocurrency and these tokens are developed based on the DeFi concept. Decentralized finance is quite different from traditional finance. Traditional finance systems will allow users to transfer funds to other persons, but banks monitor the transactions. Whereas a Decentralized finance system has no intermediaries while transferring funds like the p2p process.
In this article, we can see the “DeFi vs Traditional Finance “.Let’s go into topic..,
First, Know the DeFi..,
Decentralized finance is simple, it is the financial system that builds into the public blockchain and DeFi applications are open source code, anywhere can use this. It allows users to borrow and lend funds. Decentralized platforms operate independently, without no third personal intermediaries. It runs based on a smart contract.
DeFi vs Traditional Finance
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Everyone is aware that decentralized finance is a peer-to-peer process, no intermediates are required in transactions or any financial process. Likewise, it is the opposite in the traditional financial systems, all controls are managed by the banks.
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A decentralized finance system has been built in the blockchain networks, so all data are stored in the blocks and the entire transaction will be transparent. Traditional finance system has some restriction on showing their data.
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Central banks are controlled by the national government, the banks follow the national policy and rules and control the supply of money and low GDP growth. But a decentralized finance system builds in the blockchain networks and runs in the smart contract. So that platforms follow rules only from the smart contracts.
Final thoughts
For the first time in history, the financial system has been developing with no intermediaries. The main reason is Decentralized finance. And DeFi-based applications are developed with security and speed concerns.
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