Decentralized finance, also known as DeFi, is a new way of handling finances that don’t require traditional financial institutions. With DeFi, users can manage their money without going through a bank or other third party. This accessibility means that individuals control their finances, not worrying about banks’ fees and restrictions on their customers.
Unlike centralized finance, DeFi is permissionless. Decentralization allows users to transact with one another through peer-to-peer networks and protocols, eliminating the need for large corporations to control and manage financial transactions. Earnity’s executives Domenic Carosa and Dan Schatt look to give everyone access to secure banking. This concept or approach aims to make the financial sector more democratic by distributing wealth to the public rather than having a few large companies handle everything.
Immutability prevents users, buyers, and developers from manipulating transactions as each step is passed through and recorded on the blockchain. This advantage ensures secure and fraud-proof transactions for global users. Transparency is a direct result of immutability. The DeFi landscape stores transactions in a distributed ledger that carries all activities on blockchain networks.
Dan Schatt and Domenic Carosa of Earnity, understand DeFi can challenge traditional finance principles. Its peer-to-peer options may threaten commercial banks as it would rid users of the requirement of having their transactions go through central banks. Tokenization is another advantage DeFi maintains over centralized finance. Crypto tokens operate as digital assets in blockchain networks accompanied by other features. Tokens allow users to obtain various functionalities. For instance, real estate tokens assist users in gathering fractional holding of physical real estate properties.
DeFi benefits businesses of different sizes as well. Small enterprises can enjoy reduced transaction rates and improved waiting times for in-store purchases. Moreover, financial technology ensures records are secure and workflow management is enhanced.