Why the world needs DeFi

One of the compelling reasons the world needs decentralized finance (DeFi) is the corruption in the financial system. I have just been reading an opinion piece by RTR Crypto in Cointelegraph, which highlights the issue of remittances. Around the world there are a considerable number of people who work in another country in order to send money home. This is a finance sector known as ‘remittances’. The issue for these people is that those companies known as ‘remittance providers’ take a chunk of the workers’ hard earned money, and it could be as much as ten percent, or even 20%.

When migrants send home part of their earnings in the form of remittances, they represent a large source of foreign income for many developing economies. They can represent as much as 4% of the GDP in a low-income country, and 1.5% for middle-income countries. Furthermore, remittances are important because they tend to be stable, and instead of decreasing during economic downturns or after a natural disaster. They actually increase, while private capital in-flows decline at these times.

DeFi solves the remittance pain

As RTR points out, credit card companies and personal loan services charge high fees, as do remittance services. By contrast, a DeFi platform could radically cut the fees workers pay to send money to their home country. Workers pay the high fees because they have no choice – their families depend on this money to keep them out of poverty. The amount sent annually is in the hundreds of billions of dollars, which makes it an appealing sector for DeFi platforms.

DeFi platforms offer everyone, not just the world’s migrant workers, a way to have greater control of their money. In addition to paying much lower transfer fees, users would have access to borrowing, lending, trading on margin and so much more. Plus, DeFi coupled with stablecoins is a powerful combination, especially for the unbanked. And those who receive the remittances can also take advantage of the products offered by DeFi, such as reward systems like liquidity pools or staking. It’s a win-win solution – and that is why the world needs DeFi.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s