Most spectators within the cryptocurrency space will have heard all the hot acronyms of the day, NFTs, DeFi, DAPs, DAOs, etc. While many people will know what the acronyms stand for, few understand how they function or, more importantly, how they can benefit from them.
Decentralized finance (or DeFi) is a continuously developing financial technology utilized as the foundation of the DeFi platform, Earnity, created by Domenic Carosa and Dan Schatt. DeFi is designed to take power away from the traditionally centralized financial institutions and return that power to the people. Banks, lending institutions, credit agencies, and perhaps even the Federal Reserve are rightly concerned about the prospective benefits that DeFi could bring the general public. It directly impacts the power structures they rely on for their collective existence. So, what are the benefits of decentralized finance?
For the average person, one of the major benefits that DeFi brings is the removal of fees typically charged by centralized institutions like banks. Many individuals, especially those who need to access regular International transfers, are charged obscene fees to do so. DeFi solves this problem by removing the need for the institution causing them. If you no longer need a bank, you no longer need to pay banking fees.
Another monetary benefit brought to us, courtesy of decentralized finance, comes in the form of interest rates. Any individual with a savings account will be well-aware of the sad reality that banks pay negligible interest rates. DeFi offers individuals the opportunity to secure much higher interest rates through staking mechanisms that allow users to save their wealth in liquidity pools that provide considerably more interest than would ever be paid by a bank.
The benefits of decentralized finance for the average user can be summarised as simply “more money.” This money is brought to users in the form of reduced fees and increased interest rates by removing banking institutions that have traditionally profited from high fees and lower interest rates.