Digital currencies have been around for over a decade now. Still, they remain a concept, that’s fairly new to the people. Investment and technology markets are saturated with projects and ventures that involve cryptocurrencies and blockchain apps. The tidal wave of decentralised systems is taking over the world of investment. Among all types of cryptocurrencies, bitcoin (BTC) has been the center of attention since its creation. For the majority of the investors in Africa, bitcoin is the original cryptocurrency.
According to a survey conducted online in 2020, 32% of Nigerian participants admitted to using cryptocurrency. The proportion of cryptocurrency users is higher in Nigeria than in any other country in the world. Research has also revealed that Nigeria has third place in the list of top 10 countries for trading volumes after the United States and Russia with over USD 400m worth of transactions.
The economic climate challenges and devaluation of the currency, Naira has made alternative currencies more attractive for Nigerians. They consider cryptocurrencies a better investment option as compared to shares. They also believe cryptocurrency can get them around the foreign currency restrictions. For them, it is an easier to use investment tool.
So, what’s the cause of the rise of bitcoin? According to investors, the major reason behind the increasing popularity of cryptocurrency is the top-down economic control and more importantly the distrust of centralised financial systems.
The global DeFi boom in 2020 can also be attributed to the COVID-19 pandemic. The dire financial setback faced by millions and a rapid decline in traditional stocks is causing the decentralised financial system to take the center stage. The widespread financial uncertainty has caused investors to look for alternative means of investment.
Investing in a DeFi system enables the user to borrow, lend or trade cryptocurrencies. The trading system that allows the exchange of Ethereum and Bitcoin doesn’t rely on central financial intermediaries. It is rather based on smart blockchain-based contracts. The decentralised financial system is set to replace financial institutions.
What makes DeFi a hot ticket in cryptocurrencies?
DeFi system is a lot more than a theoretical concept. It is a pragmatic financial approach with various practical applications. You can now even buy a car with Bitcoin.
Elon Musk, the owner of Tesla, the car company has recently announced that you can pay for a car with bitcoin. The leading car company is now accepting bitcoin as payment. It is believed that automobile companies like Rolls Royce and Ferrari will start accepting payments in the form of bitcoin in a matter of time.
Following are the reason why DeFi is becoming the hottest ticket in cryptocurrencies:
No more mismanagement:
In most cases, mismanagement is the root cause of financial crises. Sometimes, people have to face the consequences of poor decisions that the in-charge of monetary decisions make.
However, with the advent of decentralised financial systems, mismanagement and human error can be eliminated. Smart contracts take humans out of the financial processes, hence preventing mismanagement and human error.
With the DeFi system in place, intermediaries are not required to carry out financial operations. The involvement of several mediators makes simple financial processes a lot more complicated than they have to be.
Financial services can be quickly accessed with a decentralised financial system in place. The latest online services now rely on smart contracts that eliminate the need for third parties, allowing decentralised token exchange.
Hassle-free loan approval
Getting a loan approved no longer requires you to make several visits to the bank. DeFi system has provided users quick access to the market. Today, money can be borrowed in a matter of clicks.
A Shock-Proof Financial System
If there’s one thing, we have learned from the COVID-19 pandemic, it is the ineffectiveness of the traditional financial systems. CeFi systems are susceptible to economic shocks. On the contrary, a DeFi system is not based on human contact. This makes it the ideal financial system to opt for during a global pandemic.
Crypto loan business
The Crypto loan business is one of the most profitable business options today. Lending money and earning an interest has never been easier. All thanks to DeFi systems for simplifying the process. Today, borrowers have easy access to capital without a credit score and resources can also be used as collateral.
No-Loss’ Lotteries Game:
DeFi systems have introduced the world with a risk-free No-loss Lotteries Game in which the participants recover their full investment. The profit goes to the winner. Since there are no intermediaries involved, the process is fair as it is based on smart contracts.
Despite being in its experimental phase, the DeFi space is rapidly growing. The DeFi system has introduced us to various applications that have simplified monetary operations. However, some security issues still need to be taken care of to make DeFi systems completely risk-free. Users are hopeful that with steady growth and improvement, DeFi systems will become the core trading system in a matter of time.