The development of blockchain technology in the financial field opens the door to decentralized finance (decentralized finance or DeFi). This term refers to a wide variety of financial applications inspired by decentralized ledger technology (DLT) that, among other issues, would further disintermediate the provision of financial services.
Decentralized finance is configured as an open ecosystem to build financial tools and services without the participation of intermediaries in the sales process or to carry out operations. Thanks to the use of blockchain. It is possible to create applications to make payments, contract loans or mortgages or buy and sell financial assets directly without going to a bank, a payment provider or a broker. Currently, when a customer pays for a coffee with their debit or credit card, a financial institution acts as an intermediary between the consumer and the merchant, having control over the transaction, retaining the authority to stop or pause it and to record it. With a DeFi Development payment application, said intermediary would be eliminated, since it is all the users who use the application who would implicitly verify and register said payment.
Thus, consumers using a DeFi application have an identical encrypted copy of each and every transaction that occurs.
This protects the system, by providing users with a single immutable identity for each operation.
These DeFi Development Services applications are gaining in popularity such as MakerDAO, Aave, Synthetix or InstaDapp. There are already more than a million consumers who are users of these DeFI applications. In fact, it is estimated that the added value of these services is 128,000 million dollars.
Defenders of decentralized finance point to the existence of different advantages in its use: more democratized access to financial products, greater market efficiency, and easier access to liquidity, greater financial privacy and greater incentives for innovation. However, it also presents risks. In addition to those of a technical nature (computer attacks or complexity in the creation of cryptographic protocols), they are joined by financial risks, all of them derived from a lack of protection for users, as there is no intermediary responsible for the transactions.
In any case, they also pose challenges for the banking sector and for regulators. On the one hand, financial entities can see how a successive disintermediation of finance can threaten their presence in various business segments and reduce their profitability. For their part, regulators must rapidly set standards for a business that seems to be expanding at a very considerable speed.
