The main uses of Decentralized Finance or DeFi
The exponential growth of DeFi in recent months has led, according to important crypto references, to the latest rise in the price of cryptocurrencies, commissions, volumes and activity on the Ethereum network. Undoubtedly, we are in the presence of a true emergence in this new financial activity.
DeFi is much more than Decentralized Finance, explains Roisenzvit. DeFi sets up a true financial revolution:
“DeFi, beyond deriving from” Decentralized Finance “, for me means” finance 2.0 “. It is the simplest and most direct way to invest, leverage, take on debt or generate profits with completely innovative instruments. All within the reach of a click and an app download on the phone. In a single application we can earn interest in our funds, or invest with an advanced algorithmic robot, all in the simplest and most economical way. It is a true financial revolution “
For Alfredo Roisenzvit there are three main and general uses for DeFi
1 . Issuance of stablecoins or stablecoins
The issuance of stablecoins (stable coins) constitutes one of the main uses of Decentralized Finance or DeFi. Stablecoins are a type of cryptoassets that set their price to traditional assets, whether they are fiat currencies such as the dollar or the euro, for example, as well as gold and silver. This “pairing” seeks to reduce the volatility that cryptocurrencies such as bitcoin or ether still present.
The advantage of stablecoins is that they can be transferred digitally much more easily and by avoiding volatility, they could be adopted for everyday use as a replacement for traditional currencies, as a form of digital cash not issued or monitored by a state authority , such as a Central Bank.
2 . Loans
One of the most popular types of applications in the DeFi ecosystem is open lending or open lending protocols. The advantages of taking and granting loans in an open and decentralized way compared to the traditional credit system are several and include the instantaneous settlement of transactions, the ability to collateralize digital assets and the absence of credit controls.
By being built on public blockchains and containing the guarantee of crypto verification methods, DeFi loan services minimize the amount of trust required and reduce counterparty risk in addition to making the taking and taking and making it available to a larger public. granting of loans.
The main characteristic of collateralized loans are their very low and competitive rates (for example, DAI loans can be obtained on the compound platform at 5% per year:
3 . Marketplaces and Decentralized Exchanges
They are the DeFi segment with the most room for financial innovation.
Decentralized exchanges (DEX) are platforms that allow users to trade (“ trade “ in financial jargon) digital assets without the need for a trusted intermediary, such as an exchange, to hold funds in custody. In this case, the exchanges or trades can be carried out directly between the wallets of the users thanks to the help of smart contracts.
DEXes require much less maintenance work and for this reason they tend to have lower trading fees than centralized exchanges.
Blockchain technology has the advantage of being able to be used to issue and allow the ownership of a wide range of conventional financial instruments, applications that work in a decentralized way, and thus eliminate custodians.
Some examples of decentralized blockchain-based platforms include security token issuance, tokenized securities with customizable parameters, derivatives creation, synthetic assets, decentralized prediction markets, and many more.
An example of DEX is Synthetix Exchange
TokenSets is another good example of a DeFi application. On the TokenSets platform, users can choose from hundreds of investment strategies with parameterized robots, in a wide variety of crypto-asset portfolios.
Moonquant.capital is one of the main Traders on that platform. Specifically, they have also collaborated with Tokensets in the construction of the site in Spanish, with the aim of bringing these tools to the Latin American market.