What are the characteristics of DeFi & Potential DeFi Use Cases
What are the characteristics of DeFi & Potential DeFi Use Cases
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What are the characteristics of DeFi & Potential DeFi Use Cases

  • Non-manipulating: By being integrated into a blockchain, it is guaranteed that they cannot be misused or manipulated in favor of one of the parties. Once the smart contract is deployed to the blockchain it cannot be altered, at most deleted if the function is enabled. develop your Uniswap clone ,
  • No third parties: Its operation does not require trusted third parties to verify what is happening. The operation is verified by the blockchain itself, more specifically by the mining nodes and the validators.
  • Security: The cryptography and consensus rules of a blockchain add an additional security element. That all nodes keep a copy of the smart contracts (since they keep a copy of the blockchain) eliminates the possibility of alteration.
  • Accessible: One of the characteristics of DeFi is that they are accessible to everyone from anywhere in the world. This allows people who are not allowed or cannot access conventional financial systems to have access to a more flexible and agile economic system.
  • Transparency: Any transaction in DeFi is easily auditable thanks to the fact that they are based on blockchain technology. You can see all the movements made.
  • Decentralization: As they are stored in the blockchain, their operation is decentralized, not governed by the rules of countries or governments . The operation of these is autonomous and automated, once it is deployed.
  • Open source: DeFi is based on open source, which allows anyone to read it and verify that it has no security problems. Additionally you can download, use and modify this code for other applications.

Strengths and weaknesses of DeFi

Currently DeFi is an ecosystem that is in an early stage of development and there are many aspects that must be corrected to make it accessible to all users.

  • It facilitates access to financial services for people who are currently unbanked. It is a great opportunity for people’s financial freedom
  • The financing process for companies and different types of projects is simplified. Through DeFi, development and financing can be offered in areas or for companies that otherwise could have it very complicated
  • They offer security to all parties, since once the operation is validated, it can no longer be modified . This ensures that clauses are not added or some aspects are modified at will or in favor of one of the parties.
  • Smart contracts offer great versatility and ease in creating different solutions . Anyone can write a smart contract or simply access the code of a smart contract and adapt it to their needs
  • Interestingly, smart contracts, which are a strength of DeFi, are also a weakness. In the end, a smart contract is nothing more than a code written by a programmer and may contain errors . It is important to properly audit a smart contract before deploying it to avoid problems like the one that happened with The DAO.
  • If a financial system needs something, it is stability and that is something difficult in the cryptocurrency segment. The current mechanisms for creating a stablecoin are not perfect and may not protect against fluctuations at times. MakerDAO and DAI, whose correction variations have shown that there may be weaknesses due to protocols that are not mature.
  • The transaction processing capacity of blockchains today. Ethereum has suffered from congestion on its blockchain on several occasions due to the high volume of DeFi transactions. For this, an emergency mechanism has been devised that has yet to be implemented and we do not know how it will work. An increase in transaction processing capabilities is required for DeFi to be viable.