In the blockchain, what is the difference between DeFi and traditional finance?

In the blockchain, what is the difference between DeFi and traditional finance?

Traditional finance:

Traditional finance mainly refers to financial activities with only three traditional businesses: deposit, loan and settlement. The generalized life cycle cost also includes the use cost and abandonment cost of consumers after purchase. Simply put, finance is the financing of funds.

Challenge traditional finance and build Farah ecology

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1 .？ Vision-Serving global professional investors with investment allocation needs in the secondary market of digital currency?

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2.？ What is DEEFI?

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DeFi is called decentralized finance, which means decentralized finance or distributed finance. "Decentralized finance", compared with traditional centralized finance, refers to the application of various financial fields established in an open decentralized network. The goal is to establish a multi-level financial system and rebuild and improve the existing financial system based on blockchain technology and cryptocurrency.

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3. The difference between 3.DEFI and traditional financial system:

Difference 1: Living conditions

The survival conditions of the traditional financial system depend on the financial environment, national policies, international situation, and the strength and authority of large financial institutions. Affected by various factors, the possibility of collapse is high, and once it collapses, the impact is huge. For example, the bankruptcy of Lehman Brothers with a long history, and the country is no exception. Venezuela's monetary system collapsed; During the American subprime mortgage crisis in 2008-2009, the government and private lending institutions issued trillions of dollars in loans or mortgages to high-risk borrowers, and the consequences were unimaginable. All these have had a devastating impact on thousands of people, and once the trust system collapses, we need to take all-round measures to save it and prevent its chain reaction.

In contrast, the survival of a decentralized financial system depends on the strength of its protocols, encryption technologies and smart contracts. The influence of external factors is minimized.

Difference 2: How to apply for a loan?

For traditional finance, the process of applying for a loan is as follows:

In this system, traditional finance takes personal information as a reference and gives the biggest subjective trust evaluation standard.

But in Defi, the whole process is fully automated and decentralized.

Difference 3: How is the credit rating generated?

The credit rating under traditional finance relies heavily on subjective evaluation, and the procedures are cumbersome. After a series of background asset surveys, the credit rating still has great uncertainty. Coupled with the environmental impact of the economic cycle, lending institutions in the boom cycle speculate wildly, ignoring risks and pushing them to the extreme. During the depression cycle, the audit system was strengthened to the extreme, but the people who needed loans most were screened out. The disadvantage exposed in the two backgrounds is that the evaluation of credit rating cannot lend money to the most needy and valuable people.

The disadvantages of traditional finance are:

1. In order to control risks, under the trust system of subjective review, there are not enough conditions to accurately evaluate the credit rating of a large group of people.

2. Traditional financial model Due to national/regional/policy restrictions, individuals and companies cannot provide personal and corporate lending channels with good credit or history on a global scale.

3. The strictness of the traditional financial model gave birth to usury, which did not produce a virtuous circle of development for the market economy; If investors of all sizes want to be lenders, the usual model is to buy stock assets.

In order to establish a low-risk index environment and let more people use loans equally, Farad hopes to play a parallel function: they gather assets so that borrowers can use them. The main business is similar to the "mortgage loan" of banks. Users can mortgage their assets in the agreement to obtain annualized income, and the lender of the assets needs to pay the corresponding interest.

4.？ Farah operating mechanism

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Farad decentralized asset management platform. For more information, please click https://www.farad.vip/..

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