The following is a contributed article from a content partner of Benzinga.
Within the crypto industry, the term DeFi has been thrown around recently as one of the aspects of blockchain that will take center stage in the future. Many, however, do not quite understand what DeFi means and how it works. Despite an initial learning curve that takes getting used to, DeFi solutions are incredibly quick, scalable, and accessible by their very nature.
DeFi is poised to become a necessity of the future financial landscape — not just an innovative new concept. This article will explain 4 key DeFi benefits using the insights of a real DeFi platform called Level01. Level01 is also known as the “World's 1st DeFi Platform with AI-Guided Derivatives Trading.”
The global financial landscape has constantly battled the issue of inclusivity for several segments of the population. Many populations can’t access traditional banking services, leaving a massive void in the global economy. DeFi, at its core, focuses on decentralization that provides access to anyone with a working Internet connection.
DeFi platforms also mean that cross-border transactions can take place instantaneously and with very low fees attached to them. This has been a reoccurring issue for many people around the world. Using protocols such as SWIFT and DeFi helps solve this problem.
One of the basic tenets of cryptocurrency is to bypass the traditional banking system yet be easily obtainable and transferrable with complete reliability. And Level01 has done this very well with its LVX token, which functions as a store of value, a medium of exchange to trade options, has limited supply (anti-inflationary) and you can stake it to earn more tokens — or in today’s DeFi buzzword, incentivized staking.
With a DeFi token like LVX, anyone can trade in the huge derivatives market without needing any bank account or fiat currency. DeFi is a game-changing enabler for the unbanked masses to participate in any financial markets.
It has been suggested that we are moving towards a more decentralized world and there’s a good reason for that. There are several issues with centralized systems, especially those that relate to finance. This includes security and the risk of a single entity having control over financial resources, making them prone to attack.
DeFi offers both consumers and businesses a transparent and secure way of transacting. Cybersecurity is becoming more of a priority, even for banks, as many of them are shifting towards making use of decentralized platforms for identification as well as the issuing of assets.
For many years, token holders in centralized exchanges feared losing their tokens due to hacks or sudden closure, sometimes known as exit scams. This will never happen in a decentralized exchange, simply because DeFi exchanges do not have access to your funds.
If you want to trade cryptocurrency with complete peace of mind, simply connect your private wallet to a DeFi exchange and there will be no risks from hacking or closure. In addition, there are no withdrawal waiting periods because DeFi doesn’t have a controlling party. The Level01 app, is one example of a DeFi platform that does not hold user funds. Funds are sent directly to a user’s private wallet without the use of a traditional custodian.
3. Financial Resistance
In the past, the global financial system was viewed as a powerful and near infallible concept. However, incidents such as the 2008 global financial meltdown and COVID-19 have shown that the system is actually very fragile. Companies, stocks and even entire currencies are vulnerable to unforeseen macro-economic events.
DeFi helps work around this by providing a framework that is not as easily affected. According to Salil Deshpande, a partner at Bain Capital Ventures, many people became interested in DeFi because it can build censorship-resistant products and decentralized financial applications can make financial systems more resilient and less fragile. DeFi tokens are, by their nature, the antidote to hyperinflation, over-printing, mismanaged economies, bad governance, and failures of centralized monetary systems like banks and financial institutions.
For Level01, their LVX token caters to a gigantic derivatives market worth $542 trillion yearly, but without the overt control of any one party. The natural law of supply and demand will determine its value and it will not be affected by hyperinflation or over-printing because it has a limited supply. It is also free from any censorship or central authority intervention because as a DeFi token, it is completely decentralized.
Blockchain technology creates irrefutable ledgers of transactions and transactions which take place across the blockchain cannot be reversed. This means that the transparency and openness of these systems can be reported in real-time and do not depend on individual human integrity, often referred to as being “trustless.” This means that trades, transaction volumes, and other information be accessed easily and instantly. For example, the transaction volumes of certain cryptocurrencies can be seen in real-time by almost anyone with Internet access.
Level01 takes this a step further with its proprietary FairSense AI, which uses trusted data to assess and provide real-time, dynamic, fair price value for all participants in a derivatives market — all done within a DeFi platform powered by Blockchain technology. With DeFi platforms, you are free from intermediaries, brokers, human errors, mistakes, manipulations and all other risks associated with centralized entities.