OctoFi empowers you with decentralized finance oracles tentacles. But, what does this mean?
First, I’d recommend you to read our post ‘What is decentralized finance (DeFi)?’ You should now have a brief idea about the kinds of services this includes, the potential and the requirements of participating in DeFi.
The rise of DeFi
DeFi projects have become incredibly popular in the last year. In 2019 a total of 275 million USD was added as collateral to DeFi platforms. However, 2020 was a monster year, where these platforms managed to attract over 7 billion USD in collateral. Mainly on the Ethereum Network.
It’s clear the cryptocurrency community are suckers for decentralized finance (in a very positive way!). 2021 is the year to spread these tentacles wider, to further attract liquidity and incentivising those who provide it.
What are advantages of DeFi over centralized finance?
The limitations of centralized finance are clear.
DeFi can be seen as an ocean that has yet to be explored. On DeFi platforms it is possible to arrange savings, loans, transactions, insurance and much more with the click of a button. All someone needs is an internet connection and a decentralized (mobile) application, opening up a whole new world for people in ‘poor’ countries, as well as adding plenty of new opportunities and features to the developed world.
These decentralized applications make use of the so-called “smart contracts”. This makes it possible to arrange all the above things without using an intermediary, such as a bank.
With loans, collateral is used, so that credit scores no longer (need to) play a role, nor do high or hidden fees play a role any longer. At the moment collateral is mainly provided in stablecoins. These are coins locked against the dollar value, which means there is less risk of a loan to default.
In summary, these protocols have this in common:
- These projects are decentralized from day one. There is no party / project team in charge of the protocol.
- The code is completely open source and transparent. Allowing everyone to verify and check the contract.
- The protocol can be used worldwide from day one. It does not matter where a user is located.
- There is no account / know-your-customer / anti-money laundering verification. Everyone can work with the protocol by connecting their wallet to the smart contract.
- Developers can change these protocols in any way, or link them together. This is why DeFi is also seen as money LEGOs.
So, decentralized finance offers many advantages over centralized finance. Why isn’t ‘mainstream’ yet? Realistically this all comes down to education.
Interacting with DeFi platforms still requires some technical knowledge, knowledge about how to purchase/transact cryptocurrency and knowledge on loan collateral and the risks involved.
This is where OctoFi aims to help simplify things and educate users.