Decentralized finance (DeFi) offers several benefits over traditional or centralized finance (CeFi). These have largely been the reasons behind its surge in adoption in recent years.
DeFi has exploded over the past few years in terms of adoption and capital lockup. Even during a brutal bear market, there is still more than $100 billion locked in DeFi. Since the beginning of 2021, there has been a surge of 500% in total value locked according to Defillama. Furthermore, the figure hit an all-time high of a quarter of a trillion dollars in December 2021. Therefore, in this article, you will discover more details about the benefits of DeFi over CeFi.
DeFi is the New Evolution of CeFi
There are many benefits of DeFi over centralized finance (CeFi). Last year, former Google engineer and Magik Invest co-founder, Shiv Sakhuja, shared these benefits. He used Mirror Protocol as an example.
It isn't clear to everyone why #DeFi is better than TradFi.
Sure, bringing financial services to #crypto is cool – but why is it better?
In this thread, I'm going to explore the benefits of trading stocks using @mirror_protocol to illustrate the power of #DeFi 🪞 🧶 👇 pic.twitter.com/Ea8qZbKcL4
— shivsak (@shivsakhuja) December 30, 2021
DeFi and Mirror Protocol Benefits
Mirror Protocol is a DeFi platform built on the Terra network. It enables the creation of synthetic assets called Mirrored Assets (mAssets). These mimic the prices of real-world assets such as stocks and commodities.
Moreover, there are six benefits the platform offers over traditional finance:
- Stock Trading Environment: Mirror provides a stock trading environment that is available 24/7 every day, unlike traditional stock markets. Therefore, investors and traders can access markets and their money whenever they want.
- Global accessibility: DeFi assets are available to anyone worldwide. Furthermore, it is very difficult for most citizens of many countries to trade on U.S. stock markets.
- Direct asset transfer: DEX’s and synthetic stock platforms allow direct instant token transfers. This process is arduous and time-consuming with brokerages that require a lot of paperwork.
- DeFi lego: Crypto assets in DeFi can be used on other platforms. It gets the name ‘lego’ from this feature.
- Fewer restrictions: DeFi protocols are more flexible than traditional accounts. There are no restrictions and limitations that traditional brokerage accounts have.
- Capital efficiency: Liquidity provision is another benefit of DeFi. Users can earn extra income in Pools and yield farms.
Nevertheless, there are still risks with many DeFi platforms and smart contracts despite these benefits.
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