It is important for advisors to educate themselves on the emerging technologies used in the industry when they learn about decentralized finance (DeFi). Emerging DeFi products and services are unique to cryptocurrencies since some of them are just not practical without blockchain technology. As this is a new asset class, advisors must be knowledgeable about these issues and capable of clearly helping their clients when dealing with financial planning decisions. In order to navigate this area, clients will rely on advisors, who must be able to direct them in the right direction.
In-Depth Understanding of DeFi
A new financial system called decentralized finance (DeFi) is built on safe distributed ledgers as compared to those used by cryptocurrencies.DeFiremove the usage fees that banks and other financial institutions impose on different transactions. Anyone with an internet connection can use DeFi, and users can store money in a safe digital wallet and transfer money quickly.
By enabling individuals, businesses, and merchants to perform financial transactions through new technologies, decentralized finance eliminates the need of a middleman with the use of peer-to-peer financial networks, DeFiuses connection, software, hardware, and security advancements.
DeFi enables anyone to use financial services wherever they are, regardless of who they are or where they are located, in this way decentralized finance (DeFi) eliminates the necessity for a centralized finance model. Through individual-focused trade services and personal wallets, DeFi applications provide consumers with more control over their finances.
We have a better understanding of DeFi now let’s move towards the emerging trend of this technology.
DeFi Technology in the Gaming industry
Globally, there are more than 3 billion gamers. They also spend more than $159 billion annually. That amount is projected to reach about $256 billion by 2025.
Players and creators alike seek to better monetize the business as more and more people invest hours in this form of entertainment. Blockchain gaming is one strategy that developers are attempting to use to make money. These video games essentially run on a blockchain or DeFi rather than a centralized server. Additionally, by completing specific game tasks, players can “mine” tokens which are a plus point of this technology.
In-game transferability will require well-known DeFi protocols. Additionally, a lot of game-based cryptocurrency owners will likely want to see a return on their investment. According to a Toptal survey, 82% of developers and 62% of gamers expressed interest in generating and purchasing digital assets that may be traded between games. Since then, crypto has evolved to meet their needs.
Resolution of Scalability Issues
The increasing transaction cost is one of the issues in the rapid growth of DeFi ecosystem. The increasing Ethereum gas fee is just one example of this. Basically Ethereum gas is the fee needed to complete a transaction on the Ethereum blockchain. The cost is determined by the supply and demand for the computing resources required to handle network transactions. Many cryptocurrency projects are beginning to offer cross-chain capability as a solution to this problem. In principle, cross-chain technology aims to make it possible for transactions and smart contracts to move from one chain to another. DeFi platforms are expected to scale considerably more readily than they do on the Ethereum network alone because of this compatibility. Because of this interoperability, DeFi platforms are expected to scale significantly more easily than they do on the Ethereum network alone.
Governance Token
You might have noticed that many of these DeFi platforms, which are expanding day by day, introduce their own tokens. This strategy is known as governance token. These tokens differ from conventional cryptocurrencies in many ways. Their main goal is to provide token owners voting power over an underlying DeFi protocol.