Home Cryptocurrency How DeFi Solutions Redefine the Financial Market – Thought Leaders

How DeFi Solutions Redefine the Financial Market – Thought Leaders

by Gordon James

Decentralized finance is the next step in financial market evolution. By removing middle men and algorithms, it allows for radical innovation of digital assets. The industry remains polarized with many potential solutions that could disrupt how we think about investing, lending, and more.

“defi and the digital asset” felony” is a cryptocurrency that is designed to provide financial services. The company’s goal is to redefine the market for financial services. This article will discuss how DeFi Solutions are changing the way people think about financial markets.

How DeFi Solutions Redefine the Financial Market – Thought Leaders

 

Author: Gene Deyev, Co-founder & CEO at Stobox

Before the emergence of cryptocurrencies, the financial sector has evolved during the previous 200 years. Financial institutions are defined as organizations that hold, aid trade, and maintain records of assets represented in the form of securities, in addition to banks, which are centralized organizations. As a result, we are familiar with financial institutions such as brokers, stock exchanges, underwriters, depositories, and others. All of these financial market actors are extensively regulated, which means that their operations need specific permits and that the government oversees their procedures and operations.

Financial assets include private and public company shares, bonds, mutual fund units, and other financial instruments. Aside from the fact that each nation has its own set of regulatory requirements, all technological infrastructure systems are based on centralized management principles. That is, consumers entrust their assets to professional market players. For example, an investor buys or sells shares through a broker, traders keep their balances in exchange accounts for trading, or a bank client trusts financial institutions to keep money in their accounts. In every situation, the asset owners have faith in the third party. And that is a major issue in today’s environment that DeFi solutions are designed to address. 

What is the typical financial market’s flaw?

There are countless of incidents of licensed financial organizations defrauding their customers, going bankrupt, being banned, or losing all assets on their balance sheets. Many businesses profit themselves covertly by possessing assets that are not their own, wallowing on their balance sheets, and engaging in intricate financial games that the asset owners seldom comprehend. Even the most solid enterprises, such as Lehman Brothers, have problems, to say nothing of tiny businesses in financially undeveloped areas.

The issue is clear: individuals are unable to freely dispose of their possessions and must rely on a variety of frequently opaque institutions. Many centralized organizations still function in an antiquated manner, despite the fact that they have long since lost their legitimacy. Is it possible to alter the existing situation?

The answer is decentralized systems.

Users may own their assets without relying on custodians or other centralized entities thanks to the creation and deployment of decentralized systems.

To begin, let’s define decentralized networks as a collection of blockchains that store data in distributed ledgers without the need for a central operator. Take, for example, the Bitcoin blockchain. No authority could shut down the system or access the information it contained. To yet, no hacker has been able to get access to this network in order to steal the assets of others. In the absence of even one system administrator, Blockchain is a database with the highest level of trust.

The crypto industry’s remarkable growth over the last 10 years has showed a definite interest in decentralized technology, with 300 million consumers now using cryptocurrency. Nonetheless, they, like financial assets, are regulated in most nations.

Over the last three years, 21 legislative acts have been passed in the United States to govern activities involving crypto assets and derivatives. Decentralized Finance has become commonplace, including all financial activities using crypto assets. Decentralized exchanges, deposit and loan systems, complicated composite income schemes by giving liquidity to other protocols, and much more have all been established using new technology. The DeFi market is now valued at $239 billion (defined as TVL in DeFi protocols) and is growing rapidly.

But, as a reminder, the majority of DeFi transactions are made using traditional crypto assets that have no actual value in the offline market. When physical assets, like as real estate or corporate securities denominated in security tokens, are freely stored and traded on blockchains, the basic technical adoption will occur. This is possible because to the replacement of infamously out-of-date systems, centralized depositories, and trading platforms. We’re talking about capital liberalization, which allows everyone with a blockchain wallet to engage in the global capital market while maintaining direct ownership of their assets and without transferring ownership to other parties.

For enterprises, tokenization and decentralized solutions are the next stage.

The vast majority of enterprises in the world are not publicly listed and so do not trade on stock exchanges. Instead, they stay private and are seldom traded, making them much less liquid than the shares of public firms or even cash. Assume you own an interest in such a company and want to sell it as quickly as feasible. In such situation, you won’t be able to achieve your aim quickly: simply finding an investor takes a few months, and drafting documentation takes considerably longer. Thankfully, owing to tokenization technology and decentralized solutions, this status quo is now changing.

Any firm may be tokenized and represented in the form of liquid tokens, presenting conventional private enterprises with a brand new world of opportunity.

To begin with, liquid firms attract the attention of more investors. The ability to sell security tokens at any moment on a decentralized platform that is not reliant on brokers or middlemen is a significant benefit. Our team is working on a platform called Stobox DS Swap.

Second, since the investor’s geography is worldwide and not confined to the owner’s or local broker’s tight circle, recruiting money to such a firm is considerably easier. Tokenization has a clear benefit in terms of fully legal online fundraising.

Finally, the DeFi mechanisms bring up the possibility of new business models based on utility tokens or NFT. For example, a real estate project in Tulum, Mexico, works with its community of investors and customers using NFT and its own cryptocurrency.

Last but not least, the entrance barrier for tokenized assets for investors is as low as $100 or even less. Saving personal savings in a real-estate-backed security token will be a dependable form of saving for millions of individuals throughout the globe, given that 2 billion people are unbanked and inflation rates are rising. Imagine a future where multibillion-dollar commercial buildings are represented as millions of security tokens stored on Android phones or in the wallets of Indian fishermen, giving a steady 10 percent to 12 percent annual income and the ability to sell an asset at any moment.

Summary

Tokenization is one of the most significant development vectors today, and several nations have already included it into their growth strategies. For example, along with the Ministry of Digital Transformation of Ukraine, an analytical group from the Stobox corporation engaged in working groups on the formulation of tokenization regulations.

Finally, despite the relative newness of tokenization, there are already a large number of learning resources and numerous successful examples, and the industry is starting to take form, with its own leaders and distinctive ideas.

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  • what is decentralized finance
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  • what is defi crypto

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