With the ongoing quest for a decentralized financial system, a lot of people have asked a lot of questions concerning the future of the centralized financial system.
Centralized finance (CeFi) is the traditional financial system we are used to that involves banks and other financial institutions overseeing the financial processes.
Customers are often not aware of the rules and regulations that govern these processes in a centralized finance system.
Decentralized finance got introduced to bring about transparency, security, speed, accessibility, and efficiency in the traditional financial system.
Blockchain technology and smart contracts are used in decentralized systems to bring about transparency, accessibility, and efficiency in financial processes.
DeFi is an open financial system built using blockchain technology and smart contracts built on the blockchain to execute certain financial processes.
Because of blockchain technology, the primary features of DeFi are decentralization and it been permissionless.
DeFi provides financial services and products without a centralized authority overseeing the process. It also makes it accessible to everyone regardless of demography.
With strong internet access, anyone anywhere can gain access to the services and products of DeFi.
The decentralized finance market is always open regardless of time zones. It doesn't have starting and closing hours like the market's centralized finance.
Unlike in CeFi DeFi gives its customers the custody of their assets, which allows them to move and do whatever with their assets without requesting permission from a central authority and the use of exchanges.
The code and smart contracts used in building a DeFi platform or application are open sources to bring about transparency in the decentralized financial system. Unlike in CeFi where the rules and agreements used in governing its processes are mostly not visible and available for the customers to go through.
The use of smart contracts in DeFi makes most of its transactions successful. Smart contracts are codes that carry out certain actions if some stated conditions are met.
This makes transactions carried out in DeFi safe from being altered or canceled. This also takes out any form of limitations to a transaction of a customer.
DeFi provides speed in its transactions. It takes out the need for paper works thereby making the process of carrying out financial transactions in DeFi fast.
Having a fully decentralized financial system is going to take a lot of work and cooperation with different regulatory bodies. Maybe in some years to come, we'll have a decentralized financial system.
