Competition for consumer finance payments is becoming the competition of the century. DeFi must break traditional banks to win this battle. Given the fundamental weaknesses of the traditional financial system, decentralized finance has the potential to eliminate small banks from the competition, yet Defy faces challenges that need to be addressed to expand this area.
to the the report Coin Telegraph, The world today is moving forward with customer payments and asset savings. It is the daily activities of individuals that provide the power needed to move the world economy and financial system.
Consumers are connected to the financial system by small and micro banks. People pay, save and pay taxes through these banks. This is a ground for competition; Compete for consumer payments around the world.
You should not make a mistake, because this competition is going to be the great competition of the century. This battle will change the shape of the world far more fundamentally than what the Internet has done to the world. The Internet was all about information, but defy is about capital, and as we all know, money is in power.
Many people now either hate banks or are indifferent to them. This feeling is probably due to the fact that banks fine people for small mistakes, keep them on the phone for hours, offer the worst possible interest rates, and treat their customers in a way that pushes them to the brink of hostility.
But banks are not always to blame. Regulating and monitoring consumer rights is so advanced that “compliance” is often referred to as one of the most costly areas for micro-banks. Compliance refers to the costs incurred in complying with the required regulations for the activities of banks. Legal fines and penalties also fall into this category. Such institutions cannot innovate because they are designed to resist change rather than accept it.
Also read: What is DeFi or Decentralized Finance?
An opportunity that cannot be missed
Decentralized finance introduces the idea of offering a new world of financial products built on smart contracts, allowing consumers to change the service provider they use in a matter of seconds with just one click. .
Defay is not the only method that works better than traditional systems, Defy is completely different. In the traditional world of micro-banking, we have to trust bank operators. This trust comes at a high cost. But in the new world of decentralized finance, we rely on the code that provides the financial services we want.
Protocols such as Avi, UniSwap, and MakerDAO have the ability to directly control assets such as USCoin, Ether, and Wrapped Bitcoin, allowing them to track financial products. Create 7 days a week 24 hours a day, 365 days a year without the need for staff. This eliminates the cost of checking and balancing accounts. This technology takes financial processes and converts them into automated programs.
Decentralized finance provides an exceptional opportunity for entrepreneurs to compete vigorously in the world of finance, where once was the monopoly of multinational corporations with large legal teams. In addition, it has reduced the cost of switching between different providers to almost zero. Users can transfer their capital from the AVI platform to Compound and from there to Uniswap in a matter of minutes, without the need for paperwork and payment of fees.
In decentralized finance, users’ capital can quickly become aware of the best opportunities for valuation, and this creates what the global financial system really needs; Real competition and innovation. Competition is what makes Difai beat micro-banks. If one can get an annual interest rate of 15% from decentralized finance programs, why would one want to save money in a bank?
Threats follow opportunities
However, not everything is in order. To date, decentralized programs operating on the Ethereum network have lost $ 285 million in numerous hacks, unfair investment rewards are being distributed, and the Ethereum network is becoming more and more crowded and expensive to use.
The model of building trust is in the development of programming codes and has nothing to do with humans, but the growth of society is essential to the success of any ecosystem. A platform should never be congested to experience success, no matter how many users use it.
We now need a decentralized network where developers can implement their applications without worrying about being misused and hacked, where any improvements are rewarded and scalability issues do not become a major problem for users and developers. Only then can micro-banks be defeated and the extent of consumer finance really be seen.