What is Decentralized Finance (DeFi)? What are the Advantages of DeFi Industry

What is DeFi? What are the benefits of decentralized finance? How can you access DeFi coins?

Decentralized Finance, DeFi, is one of the sectors that has drawn massive attention in the last few years. DeFi, belonging to the ecosystem of blockchain technology, is one of the rapidly growing sectors of 2021. The market value of DeFi grew from 1 billion in February 2020 to nearly $105 billion as of April 2021. As per an analysis, from May 2019 to 2020, the number of users accessing the DeFi protocols have more than doubled.


While blockchain technology has always been significant to the financial sector, the onset of DeFi protocols has completely changed the dynamics. DeFi protocols and products have outperformed the growth registered in traditional markets in 2021. In this article, we seek to understand what is Decentralized Finance (DeFi), its relevance in the financial sector, and how you can access DeFi coins from XanPool.


What is Decentralized Finance?

What is Decentralized Finance (DeFi)? What are the Advantages of DeFi Industry

Decentralized Finance, in simple terms, refers to the landscape of decentralized applications and protocols of the banking and financial sector, built on the top of blockchain networks. DeFi is the approach to building an inclusive financial ecosystem by leveraging tools of decentralized networks. Moreover, DeFi enables innovation in the financial industry by facilitating open-source and transparent operations that eliminate the need for a central authority.


The fundamentals of DeFi have the potential to change the infrastructure of banking and financial services. The DeFi protocols do not rely on a centralized entity to monitor and govern financial operations. Based on different blockchain networks, applications are decentralized and run through automated smart contracts.


There are various applications of decentralized finance that are currently being explored in the financial domain. DeFi protocols enable decentralization in products and services of the financial sector including credit, lending, insurance, decentralized exchanges, prediction markets, banking payments, cross-border remittance, and more.


Advantages of Decentralized Finance

DeFi has registered an exponential trajectory growth and is one of the most prominent trends of the blockchain ecosystem. Decentralized finance facilitates tools to enable value transfer and expand the outreach of the current financial industry. There are multiple advantages of decentralized applications built by leveraging blockchain technology tools. The benefits of DeFi are listed below.


  • Inclusive - By removing barriers to access basic financial services such as borrowing and lending, decentralized applications bring inclusiveness within the finance sector.

  • Peer-to-peer - DeFi protocols enable peer to peer network by removing centralized/ intermediary organizations. It hands the control over a user’s financial data into the hands of the individual.

  • Autonomous - Traditional finance incorporates intermediaries to resolve disputes in services. With disintermediation, all the operations within the DeFi protocol are conducted, resolved, and processed with smart contracts.

  • Interoperability- Various applications of DeFi like insurance and lending are interoperable with each other thereby allowing value transfer within the network.

  • Accessibility - The network of decentralized applications and their applications can easily be accessed through smartphones.

  • Tradability - DeFi also facilitates tokenization of financial instruments like bonds, securities, mortgage, etc into security tokens raised on blockchain platforms. These tokens can easily be traded on a peer to peer network.


How to Buy or Sell DeFi Coins

How to Buy or Sell DeFi Coins

XanPool's cryptocurrency payment gateway enables access to several DeFi protocol and facilitates users to engage with different DeFi coins.


Some of the DeFi coins that a user can buy or sell on XanPool are:


1. Aave

Aave is a DeFi protocol for lending and borrowing services in cryptocurrencies without any centralized entity. The difference between this protocol and other lending protocols is that it offers uncollateralized loans and flash loans.


2. ChainLink

Chainlink is a protocol that facilitates ‘oracles’ so as to provide information to the smart contracts and blockchain networks. DeFi protocols and smart contracts need oracles to access data such as price feeds in order to execute a subsequent action. Owing to the popularity of DeFi projects, Chainlink has gained increased adoption because of the value that it adds to the functionality of DeFi projects.


3. SushiSwap

SushiSwap is a decentralized exchange that allows users to trade cryptocurrencies. Buyers can swap tokens within the pool and provide liquidity to the platform. SUSHI is the native token of the platform.


XanPool facilitates an innovative cryptocurrency payment gateway for users from across ten countries to buy or sell DeFi coins with local payment methods. The technological solution allows users to buy or sell DeFi cryptocurrencies using Rupee (INR), Australian Dollar (AUD) and other countries including Malaysia, Hong Kong, Indonesia, etc.


XanPool facilitates users to exchange their cryptocurrencies into fiat and vice versa without taking the custody of customer’s funds. To know more about the different features of XanPool, refer to this blog article.