Embracing Decentralization in Various Financial Sectors

5 min readJul 7, 2021

Decentralization can affect several financial markets. Some of these are asset management, decentralized exchanges, insurance, financial data, and lending.

Managing Assets

In asset management, decentralized finance (DeFi) plays a major task. DeFi enables consumers to purchase an asset with no one intervening with their ownership. Unlike when buying a stock, you are the owner of the stock, but a bank manages the asset.

One benefit DeFi provides to the asset management sector is that owners can hold their assets without revealing their identity and can enjoy global accessibility. This highlights the principle that 25% of the population has no bank or unbanked. Without getting a bank shows many people cannot acquire or own financial assets. As this becomes apparent, this provides more funding opportunities for those without a bank.

Being involved in DeFi, asset management poses some risks. One of them is that people should be careful about their trading activities. When one loses a wallet or sends funds to the wrong address, this could be a disaster. At present, there is no safety net designed for the users.

Engaging in asset management in DeFi does not mean having any risks, this market is improving its processes. Several asset management platforms being created like DeFi Escrow are more user-friendly. In time, developers of these platforms may design a better safety net for their members.

Financial Data

In traditional financial systems, only a limited group of entities and authorities have full control of the financial data. The industry for financial market data is huge. In the U.S. alone, the sector has a value amounting to about $15 billion. A stock exchange provides the market data. The exchange provides financial information like stock prices, data on basic commodities, and currencies.

With DeFi, it assists to transform this data more democratically and change in presenting and sourcing information to the users.

DEXes: A DeFi Innovation

In DeFi, decentralized exchanges (DEXes) are one of the most interesting innovations. Having no central authority is part of the entire process. Members can transact through a P2P system and conduct trading with one another.

In the conventional setup, banks play a vital role. Unlike in DeFi, where trading occurs between two parties, banks work as intermediaries. This promotes safety, which can be beneficial for trading. However, this process requires so many resources. Transferring money occurs between two banks. This transaction is quite expensive, which brings additional costs to the users.

One advantage of DEX is that it does not require money when transferring to the exchange. When allocating money in the exchange, the funds are likely to be hacked. This is a common risk that DEXes want to get rid of.

Also, as many assets are being digitized, expect these to be tradable on a DEX in the future, which is an excellent development for the consumers. Today, Curve Finance is the most vital decentralized exchange. This project cost is over $1 billion. The platform’s growth rate may stagger, where the total exchange funds have doubled.

Decentralized Lending

Lending is one of the major financial sectors that can be decentralized. Three of the leading five DeFi projects are under the lending group, and they comprise over 50% of the existing market cap. Maker is the largest, which has a value of $1.46 billion.

Ethereum blockchain is the technology behind to enable the lending sector to decentralize successfully. With the availability of Ethereum blockchain and smart contracts, it is possible to create secure and transparent protocols when borrowing or lending funds.

Lending protocols serve as innovative platforms that provide collateral loans and higher interest rates compared to traditional banks and P2P lending. All these developments are helpful for the consumer. For P2P lending, this can significantly reduce the transaction cost.

Today, banks lead the lending industry, and they operate everywhere. By creating dApps on open-source networks, they enable more healthy competition. This is a positive development in business.

Decentralized Insurance

Regarding asset management, there is no safety measure when managing assets in a decentralized setting. However, the launching of DeFi insurance platforms significantly reduces the users’ risks.

Users can now apply for insurance when securing personal wallets, pools, and smart contracts that are meant for lending and staking. Various insurance projects within the decentralized finance sectors ensure accessibility and transparency.

Large organizations dominate the insurance sector today. They take the monopoly of the business while taking advantage of the consumers. One major objective for DeFi insurance is to build a more competitive industry, which will reduce the costs for the customers. Also, this means more people can take advantage of protecting their assets, as it will become more accessible to people worldwide.

The Future of Decentralized Finance

As DeFi continues to grow exponentially, it will not be long before it becomes popular in the long term. At the start of 2020, DeFi has made an impact in various fields like lending, DEXes, and insurance. As more funders pour in, more projects are likely to follow. This leads to more developers being more creative and competitive.

One of the new DeFi platforms being developed is DeFi Escrow. Brace yourself to choose your preferred funding or build your own. DeFi Escrow provides the right tools to manage various strategies in the DeFi environment that fit your business needs.

For fund selectors, the DeFi Escrow platform provides vital insights to identify the essential DeFi strategies that will equip your enterprise to function properly. Meanwhile, fund creators can craft the most suitable DeFi fund strategies that apply to the increasing DeFi Escrow family and enhance them accordingly as needed.

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