The latest approach of blockchain-powered finance has been a remarkable phenomenon recently that has changed the way traditional finance works. The surge of the decentralized finance system has also strengthened the possibilities of blockchain implementations in financial applications. Among all the decentralized apps, decentralized finance has the highest lending growth worldwide for all the right reasons. Here are some of the undeniable reasons why DeFi lending platforms might be something worth considering in 2022 and beyond.
What exactly is a DeFi lending platform?
To put it simply, DeFi lending refers to the process of offering cryptocurrency loans on a decentralized platform that operates without the regulations of an intermediary. DeFi lending platforms allow you to enlist the crypto coins you own on the platform for lending, where you, as a borrower, can take direct loans through P2P lending. The DeFi lending protocol also enables users to earn interest as well.
Why do we need DeFi lending instead of traditional lending?
DeFi lending provides the same services provided by the traditional financial system, including borrowing, lending, spot trading, and margin trading. The main difference between these two lending systems is the time taken to conduct the entire process. Whereas traditional banking takes a significant amount of time and involves continuous checks on the status of a borrower. DeFi lending, in that aspect, issues loans much more quickly as soon as the user checks all the collateral requirements.
In DeFi lending, the entire review process is handled by smart contracts that make it easier for both the lender and the borrower alike. Moreover, when compared to conventional lending markets, DeFi lending provides better returns.
While these are just the three primary ways DeFi lending differs from traditional lending, here are other benefits that make DeFi lending surpass conventional lending.
- Better accountability
Being a public ledger, blockchain NFT offers on-demand records of the DeFi loans that improve the accountability factor. With Defi lending, you can also access the policies and rules used in granting the loan as well. You would definitely have to do your research on the blog
- Speed of the process
As mentioned earlier, DeFi loans are much quicker where the loan amount can be instantly available due to the cloud services that operate the lending platforms. It also enables the DeFi lending platforms to determine any risks or fraud associated with the loans.
With decentralized lending platforms, users get permissionless and open access to the DeFi crypto loan wallet. This factor enables users to access the decentralized apps that are built on blockchain irrespective of their geographical location or funds.
- Greater transparency
The decentralized nature of the blockchain provides the assurance of the DeFi loans are genuine. You can easily verify the loans on the blockchain, which increases the transparency of the process.
DeFi lending has immense potential to shift the gears in the financial systems worldwide. While benefits like programmability, asset management, lending analytics, and higher earning possibilities along with mentioned above, the opportunities in this industry are undoubtedly evident today.