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Decentralised finance: banking services without Banks

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It was only a matter of time before billions of financially marginalised people joined the system.

Original title: introduction to | DeFi: banking services without Banks

Original author: Ethereum enthusiast

In a highly centralised society, most people rely on Banks to keep and protect their assets, even though they offer a paltry interest rate on deposits. To earn higher returns, others choose wealth managers or stockbrokers to monitor and execute investment strategies.

These days, both banking and asset management are things we take for granted. But most of these banking services are highly inconvenient and accessible only to people in areas where the developed world already has a stable financial system.

In fact, there may be 1.7 billion people worldwide who have no access to banking services at all or do not have adequate access to them. In other words, 31% of the world's population has no access to any basic financial services. Another useful number is that there are 4.78 billion active smartphone users in the world -- that is, 61.51% of the population already owns a smartphone.

Uh huh? What does that mean? What does it have to do with DeFi?

Simply because there are already more people in the world with mobile phones than with bank accounts, and given the speed with which new Banks are laid and the growing acceptance of cryptographic money, people no longer need to rely on centralized banking facilities for financial services.

Whatever the service, all you need is a smartphone and an Internet connection, that's all.

The rise of decentralized finance

DeFi is a huge step forward compared to traditional finance, enabling everyone to create an autonomous and sustainable cryptographic currency portfolio.

Just like we can get services in traditional finance, DeFi offers: investment funds, exchange-traded funds, high-yield savings vehicles, passive income opportunities, and so on. And what DeFi offers is a fully autonomous, automated product.

This is actually a massive upgrade of traditional services. It promises to replace slow, region-bound, centralised banking infrastructure with global, non-stop financial services that can be accessed from a smartphone no matter where you are on earth.

So instead of having an identity and being allowed into a traditional financial system, everyone now has access to alternative financial services that compete with traditional ones.

Here are a few examples.

Three banking functions that can be realized without a bank & NBSP;

Let's talk about the three banking features that DeFi is ready to replace:

1. Savings accounts

From Wells Fargo to Compound

Savings accounts are a basic service in traditional finance.

But Banks can only offer you a paltry return on your money with them, and in DeFi's world there are plenty of options that can offer anyone living anywhere a few orders of magnitude more than the usual savings rate.

Compound is an obvious example, as it provides users with the ability to lend and borrow cryptographic currency assets at variable interest rates. For example, people who provide assets to the Compound money market will receive interest on the assets (plus COMP tokens!). -- And users can choose from a variety of dollar equivalents.

The interesting thing about lending to the Compound currency market is that it is virtually risk-free, since the person borrowing the assets had to provide an excess of collateral for their debt. In other words, the design allows borrowers to borrow money without having to exchange paperwork or provide identity -- all you need is an Ethereum address. (There are other risks, too.) The whole process is automated and trustless.

To take advantage of such money markets to earn interest, you need only:

To fit an etheric fang purse (e.g. Metamask browser plug-in wallet, Argent smart wallet, Dharma, or other support Web3 functional hardware) choose what you want to provide assets ($equivalents such as USDC, DAI, USDT in general can offer you the best interest rate) will you choose tokens (such as DAI) sent to the corresponding funds pool began to interest in real time to harvest! It's that simple.

In a conventional savings account, you can put cash ina bank account and earn interest on it. Compound Finance does the same thing. As soon as you deposit money, you can start earning interest in real time. Yes, you don't have to wait for the bank to pay you a monthly dividend. You get interest every second of the day.

Note: The Compound is just one of many interest rate agreements. There are many more, each with its own market and savings rate. If you want to always get the highest rate of return on your money, there are some new products you can learn about. There are aggregators designed with robots to help you optimize your savings portfolio for maximum annualization.)

2. Cryptography Money Investment Fund

From Vanguard to Set Protocol

Before we look at cryptographic money investment funds, it might be a good idea to briefly explain what an "investment fund" is. An investment fund is one in which investors entrust their funds to professional investors to manage and let them diversify their investments in order to obtain higher returns than deposits.

There are many, many forms of investment funds, from equity funds, fixed income funds, money market funds, to hybrid funds. All these funds are actually made up of a basket of stocks, bonds, indexes, Treasury bonds, and so on. Unlike traditional finance, which lets fund managers allocate capital, DeFi's solution lets us allocate capital to specific people or robots designed to execute a strategy.

A typical example is Set Protocol and their product, TokenSets.

Set Protocol is an unmanaged asset management platform that provides automated, token trading strategies. These strategies are called "sets" and are similar to traditional investment funds, which consist of a basket of assets. It's just that these assets are generated on the blockchain.

There are two types of "sets" on TokenSets:

SetsRobo SetsSocial Trading Sets are portfolios that are actively managed by someone on the platform. Each Set is independently managed, with its own time dimension, risk taking requirements, trigger indicators, and different performance.

Like investment funds, Social TokenSets also have management fees associated with their strategies, which are handed to Set's traders. These fees typically include performance fees, buy-in fee and streaming fee - all rates set by the trader. The policies of the Soical Set are still executed by human judgment, but Robo Sets can enforce programmed policies. So instead of relying on individual trading strategies and biases, it will always enforce programmed rules.

For example, TokenSets provide a passive trading Set such as the ETH RSI 60/40 Set.

Take a look at the description of Set:

The ETH RSI 60/40 mixed income Set attempts to capitalise on the ETH's trend by detecting the speed and magnitude of its price movement. As soon as the Relative Strength Index (RSI) becomes over 40 points or becomes over 60, the ETHRSIAPY becomes the automatic trigger for the rebalancing mechanism to become apparent. If the ETH RSI is below 40, the Set replaces the ETH with a Compound USDC, giving you interest on the Compound during a bear market. As mentioned above, the ETHRSI 60/40 Set performs only specific strategies, responding to price changes in the underlying asset (in our case, the ETH).

TokenSets are a great way to test an automated trading strategy to test whether a robot or someone else can beat the market -- whether your metric is hoarding BTC, ETH, or the Standard 500. Readers who want to see how each TokenSet behaves can see it here.

3. Mobile payment

From the Cash App to Dharma

Mobile payments have exploded in the past few years. Venmo, the Cash App and others are competing for market share. But all these applications depend on the banking infrastructure.

While Ethereum inherently supports global, point-to-point payments, using The Ethereum address MetaMask to do so is not that convenient.

So we needed payment apps that could both leverage Ethereum's capabilities and complement the intuitive user experience to compete with Venmo and CashApp.

One of the projects moving in this direction is Dharma.

Using Dharma, you don't bother to memorize or copy sets of 12 or 16 mnemonics. Instead, they are taking a back-to-basics approach - using email and passwords to log in. Importantly, although they have implemented traditional login methods, users still have complete control over their own money. All funds are self-managed by the user.

Like Venmo and Cash, you still have to provide a bank account if you want to make a deposit in legal dollars. Otherwise, you'll have to use your other Ethereal address to send money into the account.

If you put in U.S. dollars, Dharma will automatically convert the money into Dai and put it into a Compound agreement behind the counter. But you can't tell. It's all hidden. That is to say, when you use Dharma, you automatically receive interest at a real-time floating rate, and you can send dollars to any corner of the earth. This can all be done through a regular account.

It's like Venmo with chicken blood. Isn't that cool?

It's a bold approach that exploits the peer-to-peer nature of Ethereum while maintaining the convenience and familiarity of traditional mobile payment applications.

Easter egg: Portfolio tracking

Zerion from Mint.com

After you've spent a lot of time roaming DeFi's maze, what you probably need most is a reliable asset management interface to help you track the performance of your new investments.

Zerion is one of the simplest tools for tracking and managing your DeFi portfolio. Interestingly, after successfully connecting to your wallet, you can use Zerion directly to trade, save, provide, and borrow assets.

In essence, Zerion is a one-stop platform for tracking and managing DeFi assets.

Conclusion & have spent

DeFi Ecology is catching up with traditional finance in terms of value creation. It's really upending an industry that hasn't changed in decades.

It's a huge step forward that anyone, anywhere, with a smartphone and an Internet connection, can have access to a variety of financial services without having an identity, a written contract, or any cumbersome process. Equally important, these DeFi services were much smaller a year ago than they are today. While there is still a long way to go before we can truly provide banking services to those who lack the banking infrastructure (and liberate those who rely on Banks), the spread of open finance must not be underestimated.

It was only a matter of time before billions of financially marginalised people joined the system.

See.