Why did the Hillstone Project start?(5)
Last time, DeFi’s goal was to be a perfect replacement for the traditional financial industry represented by banks. Smart contract, one of the core components of DeFi, is a program that automatically processes assets based on information in the blockchain network, so it handles most of the work that a financial intermediary’s asset management program can handle. So, what are the advantages of Defi over traditional financial services?
1.The change of credit relationship: Since the protocol that Defi relies on is a protocol developed entirely based on the blockchain, it can follow the highly transparent and non-tamperable characteristics of the blockchain technology itself. Anyone can see the specific conditions of these agreements and the flow of its funds. You can clearly know that the agreement cannot be modified at will.
2. Low transaction costs: As DeFi can realize peer-to-peer financial transactions, its transaction costs will drop significantly. In traditional finance, the big problem of financial infrastructure is that when we are going to do an operation, the transaction threshold and transaction cost are too high. Many banks have to wait for more than three days to open an account. This is an obvious transaction cost for the entire investment. In addition, handling fee issues have been greatly improved in the Defi world.
3.The third point is efficiency. Traditional finance has many intermediaries in most fields, and the systems and responsible agencies of various countries are different. High commission fees and slow progress of financial services often occur. The basis for providing DeFi financial services is unified into Smart Contracts and the cryptocurrency used above, with low commission fees and faster speeds.
For example, it usually takes 3 days to more than 1 week to obtain a secured loan or overseas remittance through a bank. Banks also require many document procedures in the provision of services. On the contrary, the DeFi service only requires depositing the collateral in the loan smart contract, and the loan can be made immediately. As long as the recipient’s wallet address is known, the money can be sent within 10 minutes.
Because of these advantages, the market’s attention to DeFi has risen rapidly. Currently, DeFi’s Total Locked Value (TVL) is close to $10.89 billion. Considering that the scale at the end of 2019 is approximately $600 million, this is a growth trend worth paying attention to.
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