GERALD✝️ (c o c) (geraldonx)

A Deep! Dive into DeFi EP1 DeFi, they say, is the future of finance. I mean, I also think so. But for us to really know why it's the future of finance, we need to look deep into the other systems of finance and why they failed in a way: - TradFi - CeFi --- TradFi ÷ Traditional finance is the building block on which all systems of finance operate, the beginning of finance. You can also call it the old-school way of finance, which we still operate on. > It requires middlemen who manage your money, e.g., banks, insurance companies, and stock exchanges. > The government regulates and controls all activities, while central banks monitor and report directly to them. --- ● CeFi ÷ Centralized finance is similar to TradFi but different in a way. They are mainly made up of centralized exchanges and some fintech companies — e.g., PayPal, Coinbase, and Binance — where you can buy and sell crypto.

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> They still need middlemen for their operations. > They are partially regulated by the government. > They are considered to be off-chain even though they deal with cryptocurrency. --- ● This system, over time, has proven to be inefficient. This is because of: - Centralized control ÷ A system in which one body or individual has control of everything being said and done in the corporation or business. They decide the fees and the rate at which money is exchanged — in banks, e.g., the Central Bank or World Bank. From who can deposit to how much can be deposited, they must have a say in it. This centralization is not only in banks but also happens in big tech companies like Amazon, Google, Facebook, etc. --- - Limited access ÷ Not everybody has a bank account, so it might be difficult to go about daily business in this day and age — not to talk about getting loans and buying things online.

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Even people with bank accounts are not exempted since they have to pay high interest for borrowing from banks. Sometimes, their loan requests might get rejected, probably due to lack of collateral or interest from the bank. --- - Transparency ÷ There is little to no knowledge of how banks and financial institutions carry out their operations and how safe their money is in the bank. They just have to trust and hope that the bank does not one day declare bankruptcy. Even though they are protected by the government on their deposits, it is still not sufficient. --- - Interoperability ÷ The movement of money from one institution to another is quite slow and costly. It takes a lot of time due to documents that need to be processed, e.g., wire transfers, changing from one currency to another, etc. ---

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Overall, we can see that this system of finance is flawed and inefficient to meet every individual’s needs and drive the inclusiveness of everyone, from person to business and government alike. That is where DeFi plays a vital role. --- Okay, let's make sure to like and repost so that others can see this! for our next episode We are going to be talking about DeFi in-depth. Make sure to drop your questions, if any. See you 👀 guys!

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