DeFi refers to decentralized finance, a new financial service created using blockchain technology.
As its name implies, it is a system that uses "smart contract" technology to automate the execution of financial services without central managers.
Advantages of DeFi
By executing all transactions through a program, fees such as handling fees can be reduced, and no bank account or identity authentication is required. Anyone can participate, regardless of geographical restrictions.
Globally, many people do not have bank accounts, but have mobile accounts. As long as we have a smartphone, we can participate in DeFi, and we can even accept financial services without a bank account.
Due to no restrictions such as business hours, transactions can be conducted 24 hours a day, 365 days a year, and loans can be made at high yields.
Limitation on DeFi
In Japan, the legal framework has not been fully developed, so even if users are subjected to losses such as hacking or fraud, there is no protection mechanism either.
The issue of fraud using security and insufficient knowledge is widespread and requires individual responsibility to address. Although security continues to improve, knowledge to protect personal assets is necessary.
In addition, as the legal framework further develops, DeFi may require identity authentication or be subject to regulation.