In my previous posting on Web 3.0, I told you that I'm going to publish a posting on Defi!
If you've ever invested in Metabus, NFT, Bitcoin, or something like that, or you've ever been interested in it
I'm sure you've heard it at least once.
Defi stands for Decentralized Finance, a decentralized financial system.
It's also called decentralized finance or decentralized finance.
Unlike CiFi, which collectively refers to all financial services based on cryptocurrency,
It is a financial service based on smart control focusing on the concept of decentralization.
It's about financial services using digital assets, virtual assets, or tokens.
The core of DEFI is to automatically centralize what existing finance does with Ethereum's smart contract.
It's based on blockchain technology. It is characterized by the absence of any institution or intermediary.
Since there is no coordination in the middle, transaction costs are reduced and this cost is returned to the user.
Currently, most financial institutions are under tight control of the government and businesses.
However, banks, including securities firms, are busy preparing for blockchain-based coins.
On April 10, according to the virtual asset industry, the Korea Federation of Banks recently prepared a proposal for
the transition committee of new President-elect Yoon Seok-yeol.
Through the "Banking Industry Recommendation" report,
they asked for permission for banks to enter virtual asset services.
Virtual asset exchanges such as Upbit, virtual asset storage electronic wallet services,
virtual asset trust services (custody), etc
I mean, let banks do the businesses that are part of the virtual asset business. (Source: Newsis News)
Until now, banks have not been able to directly participate in the virtual asset business and have indirectly carried out virtual asset-related projects through equity investment.
Under the current banking law, it is not possible to directly operate a virtual asset business
It is said that it is conducting a custom business by establishing a joint venture and investing in equity.
In other words, central financial intermediaries are also preparing to step into the deflationary phase.
Why is it Defi all of a sudden while talking about NFT?
There is much speculation that NFT acts as a certificate of ownership of digital assets in decentralized Web 3.0.
In other words, the moment when there are many restrictions at present,
but in the end, compatibility between other Dapps is secured?
This means that NFT can be used as collateral for tickets or loans.
Defi will operate in the form of lending a certain amount of money with cryptocurrency as collateral.
Block Pie, Terra, Abe, and Chainlink are supporting the service.
Whereas traditionally you go to the bank for a loan, you can get a loan from an individual through P2P.
Through a smart contract, you will write a contract agreement with a blockchain code
and receive a cryptocurrency if the conditions are met.
There is also a risk that there is no subject to take responsibility in the event of a security accident.
It's also unstable because it's moving to platforms and platforms.
However, market risk due to market price fluctuations such as interest rates and exchange rates can be avoided.
There's also the advantage of avoiding the risk of not being able to repay the money you lend to someone,
or the risk of management such as embezzlement.
The possibility of money laundering is still unabated.
It's a double-edged sword, but I personally don't think it's completely reliable yet.
The moment the government decides how to respond to digital assets, taxes and so on will increase
I think safety will be secured that much.
The address of the wallet (ex. Meta mask), key, remittance amount, etc. are entered
and then the verification process is performed.
After that, we will record the transaction and move the coins together.
The verification of these smart contracts is confirmed by the nodes*,
and some of the remittances are paid at the nodes' fees.
*Node: Blockchain does not keep and manage transaction records on a centralized server
Individual servers participating in the transaction gather to maintain and manage the network,
and these individual servers, that is, participants, are referred to as nodes.
Can I get a loan with coins or NFT as collateral? Yes! It's possible!
Since NFT is also blockchain-based, it has the advantage of being able to connect issuers
and investors without intermediaries.
In other words, NFT is proposed to be provided as collateral by the NFT holder without intermediaries
Based on the proposed NFT, conditions such as loan amount and duration will be presented.
If accepted, the contract is recorded in the blockchain as a smart contract.
Currently, the focus is on short-term liquidity,
but I think long-term liquidity will be possible once the market is established.
There are coin loans used by coin traders, but there is a risk that Altcoin can be manipulated.
Do you have any idea about Defi? :)
In the next posting, we will find out about Dao and others, so please look forward to the next posting!