As an after-thought of too many human errors in the financial system that needed checkmating, DeFi came to save the day by the action of one man’s brainpower.
An issue of concern affecting the financial world be it centralized finance, insurance, lending, or other assets all boils down to a major factor which basically is human error. For example, why can’t a dispensary deposit cash in a bank? As earlier stated, human error. These rules and regulations are usually unnecessary.
The blockchain ecosystem substitutes the need for human interference. Now, this technology is widespread because an individual, Satoshi Nakamoto was smart enough to realize humans could be replaced in the decision making process.
Approval is not often required in decentralized finance, either to borrow or lend money from a bank. I just need to meet certain, automated criteria. There’s no prejudice.
Also, there’s no judgment against somebody because of age or some fictitious scoring system that can be gamed. It doesn’t matter what race, gender, or sexual persuasion you are. If you meet the criteria in DeFi, the transaction will be completed. If otherwise, it won’t.
Satoshi’s Blockchain Idea
Bitcoin founder Satoshi was smart enough to see the need to remove people from the equation. Big banks will reject your account application upfront or wait for their compliance department to deny it, which then causes your money to be placed on hold, beginning to delay the process of getting out your money.
In the long run, people smartened up. They realized you need to take people out of the equation, because, they generally, make mindless decisions.
DeFi is the future. Unless these banks make a lot of very big changes to their business model in short order, they won’t exist. Chase Bank, Bank of America, Wells Fargo, and others I don’t care how big they are won’t exist in ten years if they don’t fix the issues that are wrong that cryptocurrency fixes.
As such, decentralized finance will spur forth world-changing innovations. Why would I go put money in a bank and earn a tenth of a percent interest or a quarter of a percent interest when I could instead put a million dollars on deposit into a staking system or a yield farming system and earn up to 15%.
Therefore, there is no reason to place money into a bank so they can make 6% on mortgages and 8% on car loans off your money, where nobody benefits besides the bank itself.
This is one of the biggest things that’s going to change over the next few years, you’ll see fewer people putting their money in banks and instead into these decentralized finance ecosystems.
People will smarten up and say, I’m going to not only put this on deposit and earn money, but I’m going to borrow money against this DeFi platform in lending, and instead of paying capital gains taxes on my profits, because I had a taxable event by selling, I’m never going to sell.
I will borrow against my stash and pay a small amount of interest, which is probably going to be beaten by my appreciation in my staking earnings. So you’ll be able to borrow money against these without paying taxes.
Decentralized finance eliminates almost if not all of the traditional finance concerns that people have, such as putting money in the bank and earning meager interest as a return and then having to pay an enormous amount as tax when they make profitable investments.