DeFi, what is it and what does it do?
DeFi, short for Decentralised Finance, is an entire new economic ecosystem of financial assets and services that are run on decentralised networks, known as a blockchain. It does not rely on central financial intermediaries, such as brokerages, exchanges or banks and instead uses smart contracts on blockchains, the most common one being Ethereum.
The main purpose of DeFi platforms allows people and large institutional investors to lend or borrow funds from others, trade cryptocurrencies and earn in some cases large interest amount on their savings-like accounts.
Long gone are the days where you can park your savings in the bank and receive a decent return on your hard-earned money. Currently the big banks in Australia are making you a return of no more than 0.35% ROI pa on your savings. This has caused not only personal investors but the big institutions to look for alternative options that are going to far outperform what they are currently making, and the answer seems to lie in DeFi.
When it comes to investors, especially professional investors they are concerned in one thing and one thing only: returns. And when looking for an investment they are only concerned in an investment that is going to give them consistent high returns that outperform the current market. Professional investors are moving towards Digital Assets because they are doing just thing, far outperforming and other traditional investment on the market.