What is the difference between blockchain DeFi and traditional finance?
Traditional finance:
Traditional finance mainly refers to financial activities that only have the three traditional businesses of deposits, loans and settlement. The broad life cycle cost also includes usage costs, waste costs, etc. incurred by consumers after purchase. Simply put, finance is the financing of funds.
Challenge traditional finance and build the Farad ecosystem
?
1.? Vision - Targeted at professional investors around the world who have investment allocation needs in the secondary market of digital currencies. Services?
?
?
2. What is D eFi?
?
DeFi, the full name is Decentralized Finance, which is "decentralized finance" or "distributed finance". "Decentralized finance", as opposed to traditional centralized finance, refers to various financial applications established in open decentralized networks. The goal is to establish a multi-level financial system based on blockchain technology and cryptocurrency. as a basis to re-create and improve the existing financial system.
?
3. The difference between DeFi and the traditional financial system:
Difference 1: Survival conditions
The traditional financial system Conditions for survival depend on the financial environment, national policies, international situations, and the strength and authority of large financial institutions. Affected by various factors, the possibility of collapse is high. Once it collapses, the impact will be huge. For example, when the historic Lehman Brothers went bankrupt, the country was no exception. The collapse of Venezuela’s monetary system; the U.S. subprime mortgage crisis of 2008-2009, when the government and private lenders issued trillions of dollars in loans or mortgages to high-risk borrowers, had disastrous consequences. These have had a devastating impact on tens of thousands of people, and once the trust system collapses, comprehensive measures need to be taken to save it and prevent the chain reaction it will bring.
In contrast, decentralized financial systems live and die by the strength of their protocols, cryptography, and smart contracts. The influence of external factors is minimized.
Difference 2: How to apply for a loan
In traditional finance, the process of applying for a loan is as follows:
In this system, traditional finance uses personal information as a reference. The judging criteria give the greatest subjective trust to the judging criteria.
But in Defi, the entire process is completely automated and decentralized.
Difference 3: How credit ratings are generated
Credit ratings under traditional finance rely heavily on subjective evaluations and have cumbersome procedures. After a series of background asset investigations, credit ratings are still highly uncertain. Coupled with the general environmental impact of the economic cycle, lending institutions under the boom cycle speculated wildly, ignored risks, and pushed the danger to the extreme. During the recession cycle, the review system was strengthened to the extreme, but those who needed the most loans were excluded from screening. The disadvantage exposed in both contexts is that the assessment of credit ratings cannot lend money to those who are most in need and of greatest value.
So, the disadvantages of traditional finance:
1. In order to control risks, relying on the subjective review trust system does not have enough conditions to accurately assess the credit rating of a large population.
2. Due to national/geographical/policy restrictions, the traditional financial model cannot provide individuals and companies with good credit or history of lending channels around the world.
3. The strictness of the traditional financial model has given rise to models such as loan sharking that do not produce a virtuous cycle of development for the market economy; if investors of all sizes want to become lenders, the usual model is to buy stocks assets.
In order to build an environment with a lower risk index and enable more people to use lending equally, Farad hopes to perform a parallel function: they pool assets and make them available to borrowers. The main business implemented is similar to a bank's "mortgage lending". Users can mortgage their assets in the agreement to obtain annualized returns, while the lender of the assets needs to pay corresponding interest.
4.? Farad operating mechanism
?
Farad decentralized asset management platform. To learn more, please click https://www.farad .vip/
?