¿Cómo blockchain soluciona problemas financieros?

DeFi stands for Decentralized Finance and is a concept that seeks to change the paradigm of money management and turn it into a decentralized process, without intermediaries, so that each user has complete control of what belongs to him and can visualize what is happening with his money.

Traditional financial services, such as banks, the central bank of a country, companies, fintech, brokers or any other type of money-related service such as the IMF, usually perform the same type of operations. Managing money, granting credits and loans, monetary investments in various financial assets, and so on.

All of these use money as a raw material to do their work. However, these types of organizations require investments and the trust of their users to accumulate capital, invest it, make profits and reward those who deposited their capital with interest.

What makes the Blockchain system attractive to people is everything related to money and investments.

Challenges of the traditional financial system

Traditional entities have common problems. On the one hand, the trust of their users and having to give guarantees and have credibility that the money arrives where they say it arrives and is used in the way they claim.

This type of services are "black boxes", that is, they do not allow to see what is really happening inside. Their users only deposit money, and receive something in return, without being able to see what is actually being done. They are centralized entities, that is, a group of people make the decisions and users can't do anything about it.

Blockchain financial services use case

Blockchain and smart contracts solve all the challenges of the traditional financial system and that's where the DeFi concept comes in. Everything is OpenSourced, the black box becomes a white box allowing any participant to have transparency of how a DeFi service works.

The services are borderless, you don't have to ask permission from anyone on the other side of the world to use these types of services or have an account at a certain bank. In addition, they allow equal access for everyone. There is no discrimination whatsoever to access the services.

Just by having a wallet with funds, anyone can participate through a DApp or Decentralized Applications.

These allow the use of decentralized financial services easily and without the need to understand any technical concept.

This is Blockchain's proposal to transform the world's economy and finance. I recommend that you read and learn a lot about it before making the decision to actually put your money in this type of financial services. Delve deeper into this world with the Introduction to Decentralized Finance Course.

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Contributed by: Kevin Fiorentino.