Can DeFi be a kingmaker in falling markets?

According to Khalid Howladar, traditional banks are failing nearly 2 billion people around the world who do not have access to financial services.

However, DeFi can be a lifesaver.

Nearly 2 billion people lack access to basic financial services and are “unbanked” in 2020, the majority living in high-growth emerging countries.

The lack of banking infrastructure in these countries is a major cause of this phenomenon, which is often due to the challenges surrounding the profitability of these customers, who are generally low-income. Decentralized finance (DeFi) offers the opportunity to provide services at a lower cost to these services while promoting global financial inclusion.

Different from the rest: DeFi

Although it remains a major force in the DeFi ecosystem, Ethereum’s market share of total value locked (a crucial DeFi usage statistic) has declined to around 70% in December 2021 as additional competitors entered the region, including Terra, Binance Smart Chain, Avalanche, and Solana. , to name a few. Indeed, there are a host of new blockchain-based ecosystems on the horizon, including Ethereum 2.0, and no chain is likely to take the lead in the near future.

This healthy competition lowers the barriers to entry and lowers the cost of switching. For example, Ethereum-based applications are permissionless and have the ability to cope with and fork codebases without difficulty. This lowers the barriers to entry for regular users and positions them as direct beneficiaries.

How Defi Can Save the Crypto Market

Most DeFi platforms emphasize transparency as the software and protocols are often open source, with the underlying code available to the public for inspection and audit.

Users can now earn, save, send and trade blockchain-based digital assets (or tokens) and non-fungible assets (NFTs) through digital wallets and decentralized exchanges (DEXs) without having to deal with brokers or exchanges. expensive banks through Defi .

They can even use more advanced tools like borrowing or lending, as well as insurance while maintaining full control over their assets. It should be noted that due to the widespread use of interest-based income or products, these tokens are considered illegal by groups who view interest-based debt as unethical and exploitative. .

Why Challenge?

Defi now offers borderless crypto-asset markets with access to larger pools of liquidity, significantly reducing transaction costs for market participants. Several decentralized exchanges now offer better and more trader-friendly exchange rates for financial assets than centralized exchanges and walled-in service providers.

Expanding access to crypto-asset markets will contribute to broader financial inclusion in developing countries if done in a way that provides adequate customer protection. One of the United Nations Sustainable Development Goals is to increase access to digital financial services, and Defi is at the forefront of this effort.

ALSO READ: A New Rage in Web 3.0 Decentralized Financial Products

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