Show me the Web 3.0 money: An introduction to DeFi
Welcome to the future of the Internet, where Web 3.0 is changing the way we do almost everything – including how we deal with money. Web 3.0 is unique in that you can create, share, and trade without relying on large corporations or middlemen. And one exciting concept in Web 3.0 is Decentralized Finance, or DeFi for short.
DeFi is a new way of handling money and financial transactions using that key technology buzzword you keep hearing about: ‘blockchain’. Think of blockchain as a digital ledger that keeps track of all transactions in a secure and transparent way.
One of the best things about DeFi is that it removes the need for middlemen like banks (with apologies to our banker readers). In traditional finance, we usually have to rely on banks to handle our money and other financial products. But with DeFi, we can do all of these things ourselves, without needing a bank (Figure 1). This means that we have more control over our money and can make decisions on our own terms.
Figure 1: How decentralised finance works
Source: ft.com
DeFi is also accessible to almost anyone, no matter where they are. Traditional finance can have barriers like high fees and complicated rules that make it hard for some people to participate. But with DeFi, anyone with an internet connection can join in and take advantage of the opportunities available.
One of the most exciting things about DeFi is that it opens up a whole new world of financial possibilities. It allows people to use digital currencies, like Bitcoin and Ethereum, to make transactions and investments. These digital currencies are not tied to any specific country or government, so they can be used all over the world without any restrictions. This is great news for people in places with unstable currencies or limited access to financial services.
“With DeFi, anyone with an internet connection can join in and take advantage of the financial opportunities available.”
DeFi also lets people use something called ‘smart contracts.’ Smart contracts are essentially digital agreements that are automatically executed when certain conditions are met. For example, if you want to lend money to someone, you can create a smart contract that automatically transfers the money to the borrower, to then repay the loan with interest. Smart contracts make transactions faster, cheaper, and more efficient, without needing lots of paperwork or middlemen.
Another promising intangible around DeFi is that it encourages creativity and innovation. With traditional finance, innovation is often limited by rules and regulations. But with DeFi, developers and entrepreneurs have more freedom to create new financial products and services that can help people in different ways. Think musician or writers’ royalties or even insurance. This can lead to more options, better financial tools, and more opportunities for people to manage their money in a way that works for them.
As mentioned, DeFi promotes financial inclusivity, which means it helps more people have access to financial services. There are still significant parts of the world where populations do not have bank accounts or credit cards. But with DeFi, participation in the financial system no longer requires these things. This can empower people who might not have had access to these services before and give them more sovereignty over their money.
Filecoin, the new decentralized Web 3.0 data storage protocol, has just seen the launch of The Filecoin Virtual Machine (FVM). It’s a powerful tool that enables developers to create DeFi applications on top of the Filecoin network, leveraging its decentralized and secure storage capabilities. This promotes financial reach, fosters innovation, and enables developers from around the world to participate in building the future of finance. The Filecoin Virtual Machine is a significant development in the exciting world of DeFi, shaping the future of finance as we know it.
However, like any new tech, it’s important to know that DeFi also comes with risks. Since it’s a new concept, there are still challenges to overcome, like making sure transactions are secure and protecting against scams. So it’s important to be careful and do your research when participating in DeFi.
Web 3.0 and DeFi are changing the way we handle money and financial transactions. It’s giving us more control, more access, and more opportunities to manage our money in a way that suits our needs. So get ready for an exciting future where you can be in charge of your own finances. Take that to the bank.
Disclaimer: This Article has been prepared by Holon Global Investments Limited ABN 60 129 237 592. Holon Global Innovations Pty Ltd (“HGI”) is a wholly owned subsidiary of Holon Global Investments Limited (together “Holon”). HGI is a Filecoin (FIL) Storage Provider and is positioned as a major player in the FIL decentralised data storage arena for Asia Pacific. FIL Storage Providers are rewarded in FIL for the provision of data storage capacity. Holon, its officers, employees and agents believe that the information in this material and the sources on which the information is based (which may be sourced from third parties) are correct as at the date of publication. While every care has been taken in the preparation of this material, no warranty of accuracy or reliability is given and no responsibility for this information is accepted by Holon, its officers, employees or agents. Except where contrary to law, Holon excludes all liability for this information.
