Decentralised finance (DeFi) platforms are increasing in popularity in the blockchain space.
A core tenet of blockchain is its decentralised nature. Since no single authority holds control over the system, blockchain technology is often believed to be fairer, more secure, and less vulnerable to manipulation or fraud.
As an extension of this, decentralised finance (DeFi) is opening up the availability of loans and credit through decentralised ledger technology, without the need for banks or other central authorities.
“DeFi brings magnitudes greater accountability and transparency to investors making for a healthier financial system,” said Nick Cannon, head of growth of Bloqboard, a new DeFi lending platform, in a CoinTelegraph article. “These products will broaden access to sound financial investments no matter what geography you reside in.”
Open-source, decentralised lending offers advantages over traditional financial networks, especially for those that may have limited access to lenders.
Antoni Trenchev, co-founder of Nexo, stated that as long as users have crypto assets, they can borrow cash that is delivered to their bank accounts. Nexo is a crypto credit line provider that serves over 200 jurisdictions and offers over 45 fiat currencies, such as the euro, US dollar and Thai baht.
“With a decentralized loan, you’re not dependent on having access to a credits system and you are able to customize the duration and the cost of the loan however you want,” Guillaume Palayer, co-founder of decentralized crypto asset management platform Betoken, told CoinTelegraph. “As far as I know, no centralized loan providers offer this kind of advantage in a trustless fashion.”
In line with the principles of blockchain, DeFi is not limited by geography in that way that traditional lenders are. By requiring collateral instead of a credit score or credit history, those who are cut off from typical credit systems have more options through blockchain-based lending platforms. Guillaume went on to explain that the control, security and permissionless nature of DeFi platforms offers greater security and accountability for its users.
“Permissionless because everyone can access it without conditions and independent of your local financial system’s health,” he said. “Security and control because the vast majority of DeFi products are non-custodial and offer the option to opt-out of their service with a simple transaction.”
“There is no fixed repayment schedule, no strict maturities,” explained Antoni. “As long as you have sufficient collateral to secure your borrowed funds, you have the flexibility to repay your loans at any time with cash or crypto assets.”
According to the recently launched De.Fi Review, the top lending platforms in this space are EOS REX, Maker DAO, Dharma, Compound, NUO, and ETHLend. EOS REX is the largest with over $620 million worth of EOS locked in its reserves, followed by Maker DAO with $405 million in Ether.