Lending will also evolve in DeFi

DeFi draws inspiration from the blockchain technology behind digital currencies and is not controlled by a single centralized source. What sets DeFi apart is that it extends the use of blockchain from simple value transfer to more complex financial applications.

Lending will also evolve in DeFi

DeFi can use CBDCs and smart contracts to provide financial services, eliminating the need for intermediaries such as guarantors to obtain instant loans and allow peer-to-peer transactions without intermediaries. The benefits of this are savings on commissions and better interest rates. Currently smart contract-based lending and savings businesses are the more popular DeFi services.

DeFi is open source, which means that protocols and applications are theoretically open for other projects to combine. As a result, users can mix and match protocols to unlock unique DeFi services by developing their own dApps.

DeFi is making an impact

DeFi applications are not handled by companies and their employees like traditional finance. Instead, it is usually handled by smart contracts. Smart contracts are applications that run automatically when certain conditions are met. Once the smart contract is published to the blockchain, the DeFi application can run on its own with little to no human intervention.

But in reality, developers are responsible for bug fixes and DApp upgrades. In contrast, traditional finance relies on human interaction to perform its tasks.

Lending will also evolve in DeFi

At the same time anyone can audit the code of the blockchain because it is transparent. In addition, everyone has the right to view transactions, which can also create privacy and security concerns. In the traditional banking system, customers do not affect the creation or maintenance of financial products. For example, if you live in China and want to transfer money to someone in the United States, you may need to use a third-party service that charges transaction fees and conversion fees.

DeFi is designed to be accessible globally this year, so users can use the same service no matter where they are. Most DeFi apps are available to anyone with an internet connection. Users can sign up with smart contracts directly through their wallets.

If the user does not like the user interface of the banking application, then complaining to customer service has little effect. However, if you don’t like the interface of a DeFi application, you can use a third-party interface or even create your own.

How does DeFi affect the lives of ordinary people?

There is no doubt that DeFi is a key element in the disruption of blockchain technology. Not only does it create a better alternative to traditional financial practices, but it also innovates entirely new financial concepts such as synthetic assets. With the financial world undergoing a rapid transformation caused by DeFi, now is the time to look for new opportunities.

Lending will also evolve in DeFi

Blockchain-based applications are inherently slower to develop than centralized applications. DeFi program creators must consider these limitations and then must optimize their work. DeFi applications transfer ownership from intermediaries to users. For many, this can be a negative aspect. When products are deployed on a public blockchain, the risk of user error is minimized.

Currently, using DeFi applications requires additional self-manipulation work from the user. DeFi applications need to provide real usage advantages that encourage users to leave the traditional financial system and become a fundamental part of the global financial system.

The future of the DeFi ecosystem

Over the past two years, the adoption of ETH networks has skyrocketed and the network has matured. Today, more than half of the entire DeFi ecosystem runs and builds on the Ethereum network. AAVE and Uniswap are the two largest DeFi platforms built on Ethereum. Since the move of ETH networks from POW to POS, the DeFi and Web 3.0 ecosystems have recently undergone some significant technology upgrades.

This upgrade is enhancing the adoption and development of the Ethereum network. Startup teams can build on the Ethereum network more easily and confidently. Trading will be smoother and faster than before. Build more dApps easily and efficiently. These changes can be seen in the ETH network system.

By moving from proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanisms, merging will change the way value accumulates in the Ethereum network. Over time, the usage of the ETH network will increase, and there will be more and more transactions on the network, and we will definitely see a deflationary issuance rate. Thus, this new system creates a pathway to generate direct secure income from held ETH.

This is significant for investors, especially in the DeFi space, and may be attractive to fund managers who are primarily focused on generating stable returns with high upside potential. In addition, ETH staking will also drive the entire decentralized finance (DeFi) space. The size and reliability of the Ethereum network makes it roughly equivalent to the current U.S. Treasury market.

Lending will also evolve in DeFi

ETH staking has become the de facto “risk-free” interest rate for cryptocurrencies and serves as the benchmark rate for various revenue-generating DeFi projects.

Ethereum mergers and future Ethereum upgrades, coupled with the development of the Layer 2 blockchain, allow for massive scaling while inheriting the security guarantees of the base layer, will create a new Ethereum-based proof-of-stake infrastructure, leading to a dramatic increase in the influx of users into DeFi systems.

Based on the combination of all these factors, it’s no wonder that many people are bullish on Ethereum, its ecosystem, and DeFi. This merger is about long-term value, not short-term price appreciation. The Ethereum ecosystem is built over time. Despite current geopolitical and macroeconomic factors and recent market volatility, the community continues to develop innovative products and systems, and institutions want institutions to participate.

Over the past two years, DeFi innovation has created the necessary infrastructure and tools for institutions to adopt DeFi. As a result, more and more institution-centric projects are entering the market, from approved credit pools that guarantee only KYC participants, to on-chain asset management, to MEV-resistant best execution protocols, to decentralized identity.

It can also be seen that Layer 2 projects such as Optimism, Polygon, and Arbitrum are achieving sufficient DeFi volume for yield farming. In addition, as L2 expansion accelerates after the merger, more institution-centric projects will enter the market. For institutions, the opportunity for DeFi is huge, and mergers will only help the market mature and create opportunities for investors looking for returns in riskier areas.

In addition, institutional investors who may have previously been skeptical of DeFi investment opportunities are finding the growth of Web3 and other related financial products powered by DeFi inevitable. They may still need to fully understand the dynamics behind DeFi or Web3. Ethereum’s proof-of-stake integration has the potential to transform the network and enable Ethereum’s long-term sustainability and scalability. Given the important role Ethereum plays in DeFi and NFTs, this should benefit the entire crypto ecosystem.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/lending-will-also-evolve-in-defi/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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