loader
DeFi Developers

DeFi which stands for Decentralized finance, is a financial services that is offered  on different blockchains. It includes many of the same services that are normally provided through a bank such as: lending, trading, and borrowing. One of the main differences with DeFi is there is no longer a need to deal with banks, brokerages, or exchanges. With decentralized Finance there isn’t a need for a middle man or a third party when banking. Instead, transactions are peer to peer. Meaning that interactions are just between two people.

This significantly changes the way transactions work and come with a bunch of perks. With DeFi you can expect faster services, no more need for paperwork, and no bank fees for simple services. Decentralized finance now gives you the freedom to bank without the hassle. There is nothing worse than being told you are prohibited from doing a certain type of transaction, or that if you want to pull out a big lump sum of cash that it will take days of doing so, due to daily limits of what banks allow. This type of traditional banking is becoming obsolete. 

Banking should be made simple and available 24/7 at our fingertips. It’s time to take back control of our own finances in a system that is more efficient. 

The difference between DeFi and Traditional Finance:

DeFi Developers

How does DeFi Work:

DeFi works by letting people do the financial services they currently enjoy, with decentralized technology. (Decentralization is when an organization is controlled by several authorities rather than one single entity)

Decentralized technology works by using cryptocurrencies and smart contracts to provide services. The majority of DeFi projects currently, are on the Ethereum blockchain. As many are built on Ethereum, the main components used are ERC-20 and solidity coding.

The way this works is smart contracts always run as programmed so this acts as the financial institution. Smart contracts will only act out what they are programmed to do. For example, a smart contract could be to make a monthly payment to someone. The contract will then pay person B as long as the funds are in the account of person A.

Another aspect of Smart contracts is that they are transparent. Anyone, with the right tools, can view what the contract is and what is recorded on the blockchain. Right now, this is viewable in code, many people will not understand but in the future, this could be understandable by all by using common language. Think of code compilers for developers for example.

What skills do DeFi Developers need:

DeFi developers will need an understanding of coding. Again as the majority of DeFi projects are on Ethereum, developers will need a strong grasp of ERC-20, and Solidity. DeFi is a financial related product, so developers should also have a good understanding of economic concepts such as: supply & demand, inflation, financial incentives, etc. 

ERC-20:

ERC-20 is a technical standard that is used in order to implement tokens on the Ethereum blockchain. Ethereum is one of the worlds largest programmable blockchains. As Ethereum is a programmable blockchain, developers are able to use it in order to create their own tokens. 

ERC-20 acts as a set of rules for developers to follow in order to create their own tokens. This standard makes it seamless for developers who are working on the Ethereum blockchain. 

The ERC-20 standard significantly reduces the efforts required for developers to create digital tokens on the Ethereum network. 

Solidity:

Solidity is a programming language that was designed for the development of smart contracts that run on Ethereum. Solidity is able to run on many other blockchains that are EVM compatible.

EVM stands for Ethereum Virtual Machine. The top six EVM compatible blockchains are: binance smart chain, fantom, polygon, avalanche, cardano, and tron.

Disadvantages of DeFi:

  • Using DeFi means you are your own bank now. This means you need to be organized and keep track of passwords and key phrases. If you forget your password, you could lose everything as there is no governing body to recover it for you.
  • For some this can be challenging to understand or get started on their own. In order to get this working, you need to have a crypto wallet, set up key phrases, have ledgers, etc. This may be out of people’s comfort zones.
  • Gas fees van be expensive. Gas fees are what pay for the transaction fee to go through. Depending on the price of ETH, or time of day. Prices can be upwards of $200, depending on the amount you are sending, this may not make sense to send money this way. Prices are not always this high, but they are definitely volatile and not the same daily.
  • There is a lack of insurance

 

The option is now available to take control of your money and the way that banking is done.  It’s an exciting time to have opportunities such as decentralized finance. Technology is increasing and thanks to blockchain tech we have options to advance banking. 

As humans we need to adopt to the technology we have available to us and not get stuck in our ways because something is comfortable. 

Challenge yourself to adopt and take apart of the emerging tech that is here.