DeFi is DeFinitely confusing, and it’s also DeFinitely brilliant too. In short, if you take an ecosystem that can work perfectly well without a middle-man why wouldn’t you? That’s what DeFi does. It is decentralized finance, and it works directly off the blockchain, negating the need for a broker or financial institution in the middle.
Cryptocurrency was founded on the promise of opening the gateway to the world of payments and money, banking the unbanked and allowing you to transfer money across the globe in mere moments, anonymously.
Open Finance or DeFi, as it is also known pushes this idea to the next level. It gives you a way to access every kind of product or service, for instance loans, mortgages, insurance, online trading, investing, pensions, savings and plenty more besides no matter where you are, via your mobile device, and without a middle-man.
It might sound a little strange using a decentralized app or dapp to conduct a financial transaction, however it is already happening. With dapps, you are able to build your own cryptocurrency, you can lend money to other individuals and charge interest, you can mortgage your property, and it is all conducted using smart contracts.
Bitcoin and Ethereum themselves are dapps as they are not managed by a central jurisdiction, but rather by a network of computers. Bitcoin’s purpose is mostly speculatory, although businesses are accepting it as a form of payment, however it really comes into its own as a safe haven asset or a hedge against inflation, in the same way as gold. Ethereum is a technology and blockchain that has powered thousands of apps. It is the newer apps that are really directing the conversation in the DeFi arena though.
So what’s the downside of DeFi?
Many apps clutter up your eyeline, and nibble away at your brain power. Any given day tens of new apps are released. Without a way to aggregate them all, you can be jumping from app to app to fulfill various tasks. For instance, if you trade, exchange or invest in cryptos, about how many wallets and exchanges you need access to. If you want to issue and underwrite debt to gain returns, you will need a different app. For every one of these actions, you will need to give out your wallet details. The user experience is deeply confusing and wholly unsatisfying.
On the developer side, as a dapp developer, you could be wasting time building a product that already exists. Researching dapps is no different, you could literally get lost in the black hole of new apps for hours and hours each day.
Getting Involved with the right equipment
One product of note that is giving users access to the entire ecosystem with one single login, is called Reef and their main objective is to make the experience of using DeFi a much more enjoyable and simple one. Their CEO has gone on record to say just how confusing the world of DeFi can be. You don’t need to tell us that twice.
Binance is in full support of Reef, and they have created various tradable indices which include Reef inside. Imagine a Reef with a whole bunch of fish congregating and chewing on the coral. In this picture you are the fish, and the aggregated apps are the coral.
Reef is the gateway to DeFi through enhanced liquidity and protocol aggregation, and it is their analytics engine that is the thread that pulls all of these strings. The more activity you engage in using Reef, the smarter the engine becomes. This means that users’ strategies can be customized specifically for them and Reef tells you your potential yield against your risk for all of the products it aggregates. This is a massive advantage.
Avalanche recently integrated with Reef, together with Ethereum and Binance Smart Chain, meaning Reef users can literally have the world of DeFi open up to them. Avalanche as an ecosystem for dapps itself has many benefits such as the ability to confirm transactions in under a second for less than 1 cent. This is huge.
So, DeFi may be an immature industry with a lot of fragmentation, but with the correct diving apparatus, you can open yourself up to this incredible landscape, and nibble on some coral too.
A reef is a shoal of rock, sand, coral or similar material, lying beneath the surface of water. At the coral reef, you can see the whole sea life in a single sight. Reef’s vision is to be the go-to place when it comes to DeFi. The nature of the idea involves partnering with different projects in the ecosystem. Through this, we will have access to the whole crypto community in bringing about a larger vision of simplicity for the end user.