Decentralized finance is still in its infancy. If this young and ambitious industry ever hopes to supplant current legacy systems, it must overcome some hurdles, such as achieving a seamless user experience and secure industry standards. However, new technology is being worked on right now that aims to bridge most of the major pitfalls still standing in the way.
Decentralized finance, or DeFi for short, is a blanket term for a whole array of new technologies and products that look to offer innovative ways for people to manage their finances autonomously — without the control of a central bank or institution.
Generally speaking, decentralized applications, often called DApps, are built on top of existing blockchains, such as Bitcoin, EOS or Ethereum. They typically leverage smart contract technology that allows users to have complete control over their own finances. This applies to not only an individual’s savings, investments and payments, but can extend into use cases such as lending, insurance, margin trading, predictions markets and virtually anything the legacy financial system has to offer — and more.
DeFi tools connect users with services that don’t involve any centralized point of authority. This system is designed to make the entire process more efficient, safer and completely transparent — qualities that traditional fintech solutions still struggle to implement. That being said, there are still some roadblocks preventing this vision from becoming fully realized.