Nov 2, 2023

Revolutionizing DeFi with the inclusion of real-world assets.

Decentralized finance (DeFi) has been on the rise in recent years, enabling individuals to access financial services without the need for…

Revolutionizing DeFi with the inclusion of real-world assets.

Decentralized finance (DeFi) has been on the rise in recent years, enabling individuals to access financial services without the need for traditional intermediaries. Nevertheless, the one area of DeFi that has been gaining significant attention is the role of real-world assets in DeFi. With the ability to tokenize real-world assets, DeFi is poised to revolutionize the way we think about traditional finance. However, many still aren’t aware of the key differences between DeFi and CeFi.

In this article, we will explore the limitations of CeFi and how DeFi overcomes them, offering a more promising financial ecosystem for users.

DeFi and CeFi: The Two Distinct Financial Ecosystems

The financial industry has seen a significant shift in recent years with the emergence of decentralized finance (DeFi). As it is a decentralized financial system built on blockchain technology that makes it easier for users to interact with financial products and services without the need for intermediaries such as banks and other financial institutions. In short, it helps democratize financial services and promotes financial inclusion, allowing users to lend, borrow, trade, and invest in various cryptocurrencies with no third party or intermediaries.

Nevertheless, this isn’t the case with CeFi financial system. CeFi is a platform that is operated by a central authority such as banks or financial institutes that does offer some benefits, but it also has several limitations that can make it less desirable for some users.

  • Lacks privacy, making it vulnerable to hacking and data breaches.
  • Censored by governments, limiting user freedom and autonomy.
  • Involves third-party entities that can fail or commit fraud, leading to counterparty risk.
  • Excludes certain users based on requirements like bank account or credit score.
  • Lacks transparent fees, pricing, and trading volume info, limiting user decisions

These several significant limitations make CeFi less attractive for users seeking greater autonomy and transparency. That’s why many users are looking to capture mementos with DeFi.

Compelling reasons to steer yourself towards DeFi.

  1. Take control of your assets with DeFi: DeFi allows users to store and manage their assets in decentralized wallets, providing them with complete control and eliminating the need for intermediaries. This ensures greater control, security, and autonomy over their assets.
  2. Empowers Financial Inclusion: DeFi is more accessible to everyone as it does not require users to go through traditional financial institutions to access finances. This makes it easier for people to access financial services, especially in underserved or unbanked areas.
  3. Experience unparalleled transparency and security: DeFi platforms operate on a public blockchain, which means transactions are recorded on public, immutable blockchains, ensuring transparency and auditability. Moreover, anyone can inspect and review the code that governs the transactions, inevitably providing users with confidence in the reliability and security of the system.
  4. Unlocking Boundless Possibilities: DeFi protocols can interact with each other, allowing for greater flexibility and integration between different DeFi applications and services. For example, a lending protocol can be integrated with an insurance protocol to create a decentralized insurance product that covers the risk of default on a loan. This makes DeFi highly innovative that allows users to create some out-of-the-box financial applications.

Henceforth, DeFi represents a promising alternative to CeFi, offering users greater control, autonomy, accessibility, transparency, and security over their finances. Its decentralized nature eliminates the need for intermediaries, making it more accessible and inclusive. Besides this, real-world assets are said to play a crucial role in making DeFi a success.

Curious, to know the role of real-world assets in DeFi? Stick with us bcoz we’re about to unravel it.

Bridging Real-world Assets into DeFi

Real-world assets refer to physical assets such as real estate, commodities, or stocks, that is tokenized and used as collateral in the blockchain network. Tokenization is the process of converting the ownership of a physical asset into a digital asset that can be traded on the blockchain network. Real-world assets in DeFi open up new opportunities for small investors, as they allow fractional ownership and eliminate the need for intermediaries.

Tokenization: The Key to DeFi’s Real-World Asset Integration

Tokenization is essential for integrating real-world assets into DeFi. Tokenization allows assets to be divided into smaller units, which can be traded easily and quickly. Tokenization also improves transparency and security, as transactions are recorded on a blockchain network, which is immutable and cannot be altered or deleted.

The Advantages of Using Real-World Assets in DeFi

Using real-world assets in DeFi provides many advantages. For instance, real estate owners can tokenize their properties and use them as collateral to obtain loans in the DeFi ecosystem. This eliminates the need for traditional intermediaries such as banks, which can be slow and have high transaction costs. Moreover, the tokenization of assets enhances their accessibility which opens up opportunities for small investors to invest in assets that were previously only available to limited individuals.

Enhanced Liquidity & Opportunity for Investors

An opportunity for small investors to participate in assets that were previously only accessible to large investors is by investing in real estate through crowdfunding platforms. This allows individuals to pool their funds together to invest in properties, and each investor owns a portion of the property based on their investment amount. Crowdfunding platforms also offer liquidity options for investors to buy and sell their shares in the property, providing more flexibility compared to traditional real estate investments.

Improved Transparency and Security in DeFi

Using real-world assets in DeFi also improves transparency and security. Transactions are recorded on a blockchain network, which is immutable and transparent. This eliminates the possibility of fraud or tampering with records, which is common in CeFi. Furthermore, DeFi operates on a decentralized network, which means that there is no central point of failure or vulnerability.

Ending Note

In conclusion, DeFi offers a new financial ecosystem that is more transparent, accessible, and efficient than traditional CeFi. The ability to use real-world assets in DeFi opens up new opportunities for small investors and eliminates the need for intermediaries. Tokenization allows for the creation of a more efficient financial ecosystem, which is more accessible and transparent than traditional CeFi. As blockchain technology continues to evolve, we can expect more innovative use cases for real-world assets in DeFi.

Aconomy is a real-world asset-backed DEX that aims to tokenize real-world assets with its cutting-edge technology. It benefits both investors and asset owners by empowering them to trade assets on a decentralized exchange, which provides increased accessibility and liquidity.

Customer retention is the key

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What are the most relevant factors to consider?

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Don’t overspend on growth marketing without good retention rates

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What’s the ideal customer retention rate?

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Next steps to increase your customer retention

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