DeFi- Decentralized Finance through Smart contracts & Stablecoins

It is well known that stable coins and stable coin issuance has given rise to accelerated adoption of cryptocurrencies and blockchain finance overall. Nevertheless, the reason for this adoption increase is in the ability to transport cryptocurrencies i.e., stable coins across exchanges, accounts, boundaries and even physically store it on a ledger or software such as exodus.

Decentralized finance using smart contracts and stable coins has seen profitable innovation in financial management, some of which are incomprehensible with traditional forms of money or other assets. For example, an exchange/defi institution situated in the USA can attract capital in USDC and then can lend it out to banks/financial institutions/retailers in other geographies for a higher rate of interest. In the process, they can then return a part of the profits to their end customers. The crux of the rule is that while retailers cannot lend internationally, institutions can.

Smart contract applications such as compound.finance which operate on the Ethereum network using ERC220 standards, attract investments in stable-coins such as DAI, USDC as stable coins and BTC, ETH, BAT, 0X, WBTC as cryptocurrencies. They create a lending contract between borrower and lender and facilitate paying back the borrowed amount in cryptocurrencies.

There are also a host of exchanges, wallets and applications like Celsius, nexo.io, Coinbase and Blockfi which provide interests ranging from 7% to 1.25% on your stablecoin holdings. The nexo.io also insure your stablecoin holdings using a federal program like the FDIC assuring customers of the safety of one’s holdings…

You might actually be better off just converting your fiat holdings to cryptocurrencies and earning interest off the holdings. This way it is a win-win situation for you. We are still scratching the surface of decentralized finance and as time goes by newer and newer innovations in this space will make finance accessible, decentralized and viable to both lenders and borrowers.