The advantages of decentralised financial services have been known in the market for quite some time.
The first is decentralisation: DeFi tokens allow transactions between users using multiple computers of other participants.
The second is the absence of the human factor. Decentralised finance (DeFi) is based on smart contracts, which eliminates the human factor.
Transparency can also be mentioned – the DeFi market is based on source code. All transaction information is always available to any user. Therefore, such applications will easily pass a fair audit.
Another strong advantage of the ecosystem experts call inclusivity, i.e. the possibility of launching a DeFi product for any project, without the permission of banks and regulators.
Disadvantages of DeFi
However, this new toolkit certainly has its disadvantages.
These include the low performance of the system, experts say. Blockchains are inherently slower than their centralised counterparts, resulting in additional applications. Developers of DeFi applications should take such limitations into account and optimise their products accordingly.
There is a high risk of user error within the system. DeFi applications transfer responsibility from the middleman to the user. This can be a negative aspect for many. Developing products that minimise the risk of user error is particularly challenging when products are deployed on top of immutable blockchain networks.
Another factor of instability in the ecosystem is its chaotic nature. Finding the most appropriate application can be quite a challenge, along with the fact that users must have a certain skill set in order to find the best option. According to experts, the challenge is not just creating apps, but also thinking about how perfectly they can fit into the larger ecosystem of decentralised finance.
