What is DeFi state now and in the future? More room for improvement?

DeFi is one of the happiest sites in the cryptocurrency world.

An important innovation behind DeFi is the automated smart contract. These rules executed on a blockchain can be hard work without trust. It can be understood as a vending machine. You can deposit money at one end and get the products you want at the other end without any outside interference. If DeFi has the same 50-70% access to other interference technologies such as ecommerce, it could grow into a $ 15 trillion business within the next 5 to 15 years. In many ways, it's like all apps available on their smartphones, with the significant difference being that no company in the middle is running them behind the scenes. Alternatively, a set of smart contracts that work to get the functionality of the app as needed are written into the code. This new way of providing financial services includes many benefits associated with the impact of the economy in the 21st century.

The first is the low price.The cost of DeFi is lower than the traditional budget. This is usually due to two positives. It does not require any intermediary in the financial markets and consists of free or almost free blockchain.

The second is quick.DeFi is drastically fast because it is built by blockchain infrastructure to eliminate the needs of the middle class and provide immediate financial solutions. Finally, the impact is wider. Like the Internet, crypto assets are a global phenomenon. Anyone with a network connection can create or access a DeFi application. DeFi applications can be integrated like Lego bricks, allowing new capabilities for greater flexibility, resulting in faster and more innovative transitions. On the other hand, the DeFi sub-activity continues to grow, and the small businesses created by the DeFi ecosystem are traditional financial services such as loans and mortgages, property management and insurance. Loans and business are now big, accounting for 80% of total TVL DeFi lock costs.

Let's talk about loans first. As one of the largest and most profitable services, Loan quickly became a widespread application for DeFi.Brian Brooks, former director of the United States Bureau of Monetary Audit, defines a DeFi app as a bank statement. This is a great example for a DeFi loan. This is because users can deposit cryptocurrency in exchange for income or borrow other crypto assets from private assets.

The second is marketing. Trading is another major market for DeFi, led by the DEXes exchange.They are equivalent to divisions such as the New York Stock Exchange or the Nasdaq or Coinbase. It offers users a way to trade crypto assets without the trust of a third party. It is important to note that most of these exchanges are not order-based like traditional exchanges, but use a new technique called Automated AMM to guide and manage the trade. DEX traders do not trade with each other, but with commodities that have financial capital to invest.

All of these tasks are mediated by smart contracts and do not involve any middlemen, employees, businesses, corporations, or head offices. However, some large exchanges are still similar to traditional commerce in terms of volume, cost, and functionality. Financial management is also one of the fastest growing areas of DeFi. Yearn Financial is in an important position with nearly $ 6 billion in assets exported from its platform.

Yearn uses an automated strategy to deliver the assets stored on the platform. These tips focus on finding the best DeFi output. Due to DeFi's open source status, assets under management by year and strategies used have been reported and explored. Since DeFi is new, it still faces significant risks including digital errors and poor design. There are therefore insurance applications to guard against DeFi risk. Compared to traditional insurance policies, independent insurance has not yet been reestablished. For example, the popular DeFi insurance app Nexus Mutual now invests less than 1% of TVL's fixed price in the DeFi site. This small business could also be potentially improved if the user experience could be improved, such as easier operation in other industries or additional insurance services. As the budget always offers it, DeFi marketing isn't limited to the online marketplace. Smart contracts also make it possible to enter into future contracts and other derivative contracts.

As a result, derivatives have become an important subsector of DeFi trading. DeFi applications focused on this segment of the industry include Synthetix and dYdX. Some of the special offers of these apps include contracts and options, as well as assets designed to match real assets such as product portfolio, benefits, and commodities. Derivatives is a recent and particularly controversial sub-sector of DeFi, with regulators, including the United States Securities and Exchange Commission and the Futures Trading Commission, expressing concern about the characteristics of certain securities similar to a commercial product. However, the demand for derivatives outside the United States suggests that derivatives in the DeFi market may be related to regulatory differences that have created commercial importance and insufficiency.

What are the dangers of DeFi? DeFi is also a new technology that identifies various risks that may affect DeFi's long-term view.

The first point is to build on and integrate with existing systems. Some DeFi apps now rely on real estate and business offerings provided by traditional finance such as payments, bank accounts, and credit cards. Some experts in the crypto industry believe that the number of stable crypto funds are backed by companies and owned by financial institutions in addition, resulting in a lack of connectivity, weak cultural norms and traditions.

The second is risk. Advances in blockchain and DeFi applications lead to less awareness of risk. For example, DeFi applications rely on blockchain to identify companies, which can increase the risk of infrastructure construction. If the root blockchain crashes, the DeFi app itself will not work. In addition, the DeFi application is open, so the attacker can analyze its internal functions to see what is wrong. In the event of a violation or transaction, allocating funds to users for the DeFi app increases the risk of loss or theft and cannot be reversed.

The third is the risk of centralization. One criticism of the DeFi app is that it has no real impact and allows key developers to control or access accounts. If some developers succeed, they can change the number at the bottom of the app and steal money unexpectedly. To deal with this risk, most DeFi applications only use changes when token holders agree to the changes or modifications to the agreement.

The fourth is risk management. In the short term, DeFi may face laws related to taxation, money laundering prevention, etc. As a new technology application presents a high risk, investors should expect a thorough review of DeFi, but it may cause some DeFi applications to fail. complies with applicable laws in the United States or other countries and will not work. In short, as a similar low-cost new release, DeFi threatens the long-divide market favored by traditional financial firms.

DeFi applications are nimble in a way that old financial companies simply couldn't compete with, while still making utter improvements to the global financial system. High revenue and steady growth make many DeFi applications more profitable than their initial product launch. These same features make DeFi applications easier for traders to understand than crypto assets like Bitcoin and similar trading products. Like the internet and other technological disruptions before it, the industry still has a long way to go, but DeFi is growing rapidly and cannot be ignored.