What is DeFi and why is it the freshest price tag in cryptocurrencies? (part 2)

by Salman Khan

Earlier, regulators were behind the curves, and DeFi managed to make progress in the region. For example, in a typical unsecured loan, it is a lawful necessity for the lender and the borrower to know each other and assess the borrower’s ability to repay the loan. No one needs to deny. Instead, it’s about trusting each other and protecting your privacy.

Regulators, such as the public or banks and different financial companies in the middle, need to strike a vague balance between innovation prevention and risk failure. It seems to be impossible to accept change and it would be wise to accept change. By July, the United States Securities and Exchange Commission made an important change to the adoption of DeFi by approving the first fund based on ethereum called Arca.

This is important because the biggest challenge to financial innovation is the hostility of the environment created by the old rules written in the past. As a result, some DeFi projects have failed. These include major projects such as the New Jersey-based, which were returned to 133 million dollars investors in 2018 when it was ordered that it would not operate under SEC rules.

Another reason for the increase in DeFi is the increase in key players. Many street financial companies are starting to adopt DeFi and are looking for ways to get involved. For example, the world’s 75 largest banks, led by JPMorgan, and the Royal Bank of Canada, are working to accelerate payments as part of their interbank information network. Looking for blockchain technology which is DeFi.

Large asset authority funds are also starting to take DeFi seriously. The most famous is Gray Scales, the world’s biggest crypto finance fund. In the half of 2020, 5.2 billion dollars cryptocurrency assets, including 4.4 billion dollars value bitcoins, were managed.

Third, the effects of COVID-19. The pandemic has also cut global interest scales. Some fields, like eurozone, are currently in the negative territory, and other countries, such as the United States and the United Kingdom, may do the same. If two-thirds of people without a bank account have a smartphone, DeFi also has the ability to open funds for them.

One of the main reasons people are increasing their investment in DeFi tokens is to stem the tide of growth. Various tokens are not valuable or close to anything, so we see a lot of excitement.

But whether we like it or not, we are moving towards a newer, more decentralized financial system than ever before. The key question is how to guide your development with research and balance to minimize risk and maximize potential benefits. This is a challenge for years to come.