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Decentralized finance: what is it and how to decentralize?

Few people could have imagined that the creation of cryptocurrencies in 2009 would lead us into a succession of technological innovations that would completely change the way we do business over the next few decades. One of these is decentralized finance – the basis for tokenized assets.

Decentralized finance is the protocol for creating financial products and services on a blockchain network, supported by smart contracts, and unlike traditional financial products.

Decentralization is the absence of powers that control and charge fees for operations – banks, finance and payment services.

With this, DeFi ‘s creators want to achieve an unbureaucratized financial ecosystem, with independent, cheaper, and highly secure operations.

The positive impacts of the decentralization of finances on business are many and without restriction to company size or industry sector.

Do you know how DeFi can benefit your business?

BLOCKBR, a web 3.0 native company, will show how financial decentralization works to help companies create more agile businesses with better results.

Let’s talk about her!

WHAT ARE THE MAIN CHARACTERISTICS OF DEFI?

To understand more deeply what financial decentralization is and what its impacts are on business, we can highlight some main characteristics.

  • These are the financial products we are familiar with in everyday life, but virtualized and hosted on blockchain, a large shared database, without having to go through a bank or financial system;
  • The entire operating logic of the decentralized financial product – terms, yields, installments, financial costs, and other items – is defined in a smart contract, which is the encrypted document with all the conditions;
  • The smart contract not only makes public the terms of access to the DeFi product, but is also a self-executing program that will enforce the contracted terms electronically;
  • There is no central authority to approve, reject and price the operation. Everything is done electronically by the computers in the network, through a consensus protocol;

WHAT ARE THE BUSINESS OPPORTUNITIES WITH DEFI?

As we can see so far, the financial products market is the scenario for generating business opportunities – the only and crucial difference is to virtualize the products and offer them in a digital medium with a series of advantages that the traditional market does not offer.

  • Loans
  • Insurance
  • Planned Investments
  • Mortgage
  • Crowdfunding
  • Receipts and payments
  • Trading in tokenized assets

A typical and growing example of investment is P2P lending that can be offered through trading platforms – the cryptoactive exchanges or brokers.

In them, the interested person can understand the conditions that are made available and controlled by a smart contract developed by the company that is offering the loan. Without the presence of intermediaries, such as banks and finance companies, the loan can be much cheaper.

Since the blockchain where DeFi is hosted runs non-stop, it is possible to offer services that will be purchased by people in other parts of the world.

Currently, the Ethereum network is the largest and most popular blockchain developing projects using DeFi, and much of this projection is due to its native token, ether, which is already almost equivalent to BTC(bitcoin) in popularity.

Cryptocurrencies for some years and currently accompanied by asset tokens, are the most typical forms of decentralized finance, because they bring together all the characteristics we have mentioned.

Digital and physical assets: Which is better? The BLOCKBR brings information for you to choose safely!

WHAT ARE THE BUSINESS OPPORTUNITIES WITH DEFI?

WHAT DOES DECENTRALIZED FINANCE BRING FOR THE FUTURE?

The future has already begun! Numerous industries are already using the decentralization of finance for a variety of businesses, in particular the tokenization of assets – [067-004] which virtualizes and brings many benefits for fundraising.

Certainly the question that will start being asked by companies in the next few years is not when DeFi started to make a difference, but why they are not using it yet!

MORE AGILITY IN OPERATIONS

This is a first and important benefit of DeFi in the company’s commercial and financial transactions through blockchain: everything is done in the peer-to-peer model, directly between network points.

Paying suppliers, receiving from customers, making loans, or offering physical goods and rights in digital form – the asset tokens – will be direct operations between computers, without intermediaries such as banks and financial institutions.

This makes the operations extremely agile, reducing to the maximum the term for raising funds and positively affecting the companies’ cash flow.

CHEAPER OPERATIONS

Reducing costs has become a mission for companies to face an increasing competition and crisis scenarios, both internal and market. On this point, the decentralization of finances brings much lower expenses than the fees charged by the financial market.

One point where this difference will be greatly felt is in loans, because the reduction of expenses at various points in the companies’ processes will contribute to reducing the interest rates and charges that are levied on each operation.

MORE PROFITABILITY AND COMPETITIVENESS

This is a natural consequence of transacting digitally without the cost burden that the current financial environment creates: less costs, more margin on transactions. In addition, it is possible to refine the pricing from the lower operating costs.

MARKETS THAT NEVER CLOSE

Blockchain technology works seamlessly and this will be a major competitive advantage for all companies, not just those that operate with international markets.

While the company’s teams rest, the network’s points will be available for customers to pay for e-commerce purchases, bills, credit card statements, pay off loan installments, or invest in tokenized products or real estate.

HIGHEST LEVEL OF SECURITY

The Ethereum network and others that operate decentralized finance use the highest levels of data security available in their blockchain and are immune to cyber attacks and fraud.

All transactions, whether the purchase of tokens or simple customer payments, are recorded individually in a structure that does not allow changes after all computers in the network have approved the transaction.

The approval is the so-called consensus protocol: every node in the network (every computer) has the most current position of the databases used in a particular decentralized operation – statements of accounts receivable or bank balances, for example.

All versions must be exactly the same when it comes to approving a transaction, and this prevents one point in the network from trying to enter fraudulent data, ensuring the security of the transaction.

Want to know more about the terms you will see every day when you decentralize your finances? See our blockchain glossary!

HOW TO USE DECENTRALIZED FINANCE IN YOUR BUSINESS?

As we can see, the possibilities of decentralized finance in business are limitless, as it allows the products that are part of our daily lives to be offered on a global, more secure and more agile scale.

In addition, innovative ways of doing businessare born in the DeFi world such as tokenization – the offering of physical assets and digital assets directly to the market, supported by a blockchain network with control by smart contracts.

A good example is the tokenization of receivables to raise funds for company projects.

Another purpose of DeFi of strategic importance is financial governance, making operations faster for clients and more profitable for the business.

The first step is to seek the advice of a company specialized in blockchain-based products, such as BLOCKBR, to present the project and learn all the variables

This way, your company will have the most comprehensive understanding of a DeFi project and what gains it will bring to the business!

BLOCKBR Digital Assets is a web 3.0 native fintech that unites technological innovation and digital knowledge to transform physical assets into digital assets, in the process of tokenizing assets.

The supply of physical assets and tokenized financial assets, both current and new, is democratic and decentralized, which makes the way of investing safe, simpler and more efficient.

We enable, structure, issue and offer tokens on our platform and beyond. Be aware that tokens depend on feasibility and regulatory factors.

Do you want to tokenize your business or part of it? Do you have a business solution and does it make sense to issue your own token ?

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