There's a booming crypto economy out there, where you can lend, borrow, long/short, earn interest, and more. Crypto-savvy Argentinians have used DeFi to escape crippling inflation. Companies have started streaming their employees their wages in real time. Some folks have even taken out and paid off loans worth millions of dollars without the need for any personal identification.
Some people aren't granted access to set up a bank account or use financial services.
Lack of access to financial services can prevent people from being employable. Financial services can block you from getting paid. A hidden charge of financial services is your personal data. Governments and centralized institutions can close down markets at will.
Trading hours often limited to business hours of specific time zone. Money transfers can take days due to internal human processes. There's a premium to financial services because intermediary institutions need their cut.
Stable coins are built on top of ethereum.
Lenders can contribute in a pool from which borrowers can borrow - borrowing can be done along with keeping privacy - NFTs are often used as a collateral.
Flash loans - are currently in an experimental stage. They let one borrow without collateral or providing personal information.It works on the basis that the loan is taken out and paid back within the same transaction. If it can't be paid back, the transaction reverts as if nothing ever happened. This means a lot of logic must be included in a very bespoke transaction. A simple example might be someone using a flash loan to borrow as much of an asset at one price so they can sell it on a different exchange where the price is higher.
Lending rates are apparently much higher with stablecoins even compared to normal fiat currencies.
No-loss lotteries- The prize pool is generated by all the interest generated by lending the ticket deposits like in the lending example above. If one doesn't win this time their balance gets carried to the next round. One can withdraw at any time. Winner gets the whole prize pool.
Advanced trading - Taking money out of the exchanges and ability to access global liquidity.
Ways to grow portfolio -
There are fund management products (investment dapps) on Ethereum that will try to grow your portfolio based on a strategy of your choice. This is automatic, open to everyone, and doesn't need a human manager taking a cut of your profits.
A good example is the DeFi Pulse Index fund (DPI). This is a fund that rebalances automatically to ensure your portfolio always includes the top DeFi tokens by market capitalisation. You never have to manage any of the details and you can withdraw from the fund whenever you like.
As a platform for crowdfunding - Crowdfunding dapps are used. The expenditure can also be tracked and money can be returned if a minimum milestone is not met.
Quadratic funding -
quadratic funding. This has the potential to improve the way we fund all types of public goods in the future. Quadratic funding makes sure that the projects that receive the most funding are those with the most unique demand. In other words, projects that stand to improve the lives of the most people. Here's how it works:
There is a matching pool of funds donated.
A round of public funding starts.
People can signal their demand for a project by donating some money.
Once the round is over, the matching pool is distributed to projects. Those with the most unique demand get the highest amount from the matching pool.
^ This for me means that the governments can start prioritizing on some projects actually tracking public demand at every step.
You can think of DeFi in layers:
The blockchain – Ethereum contains the transaction history and state of accounts.
The assets – ETH and the other tokens (currencies).
The protocols – smart contracts that provide the functionality, for example a service that allows for decentralized lending of assets.
The applications – the products we use to manage and access the protocols.