According to Khalid Howladar, traditional banks are failing the almost 2 billion individuals in the globe who do not have access to financial services.
However, DeFi can be a lifesaver.
Nearly 2 billion people do not have access to basic financial services and are “unbanked” as of 2020, with the majority living in high-growth emerging nations.
The lack of banking infrastructure in these countries is a major cause of this phenomenon, which is often due to challenges surrounding the profitability of such customers, who are typically low-income. Decentralized finance (DeFi) offers the ability to provide lower-cost services to these services while also promoting global financial inclusion.
Different from the rest: DeFi
Although still a major force in the DeFi ecosystem, Ethereum’s market share of total value locked (a crucial DeFi usage statistic) decreased to around 70% in December 2021 as additional competitors entered the area, including Terra, Binance Smart Chain, Avalanche, and Solana, to name a few. Indeed, there are a slew of new blockchain-based ecosystems on the horizon, including Ethereum 2.0, and no single chain is likely to take the lead in the near future.
This healthy competition lowers entry barriers and lowers the cost of switching. For example, Ethereum-based applications are permissionless and have the capacity to cope and adapt (fork) codebases without difficulty. This lowers the entrance barriers for regular users and positions them as direct beneficiaries.
How Defi can save the crypto market
Most DeFi platforms emphasize transparency because the software and protocols are frequently open-source, with the underlying code publicly available for inspection and auditing.
Users may now earn, save, send, and trade blockchain-based digital assets (or tokens) and non-fungible tokens (NFTs) assets through digital wallets and decentralized exchanges (DEX) without having to deal with costly brokers or banks thanks to Defi.
They can even employ more advanced tools like borrowing or lending, as well as insurance while maintaining complete control over their assets. It’s worth noting that due to the widespread use of interest-based revenue or products, such tokens are considered illegal by those groups who see interest-based debt as unethical and exploitative.
Defi now offers borderless crypto-asset markets with access to larger liquidity pools, cutting transaction costs for market players dramatically. Several decentralized exchanges now offer better and more trader-friendly exchange rates for financial assets than centralized exchanges and walled service providers.
Expanding access to crypto-asset markets will contribute to broader financial inclusion in developing nations if done in a way that offers adequate customer protection. One of the United Nations Sustainable Development Goals is to increase access to digital financial services, and Defi is at the forefront of this effort.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.