While many people still view cryptocurrency with some scepticism, the use of blockchain within certain industries and for specific processes has gained general acceptance. One of the offerings of blockchain that has attracted much hype is Decentralized Finance (DeFi).
New Opportunities for Small and Medium Businesses
While most banks are locked into huge and cumbrous legacy systems, which make it difficult to transform, DeFi has removed many of the barriers to entry that prevented SMEs and startups from entering the market. While many institutions regard this as a threat, some large banks have had the foresight to rely on the agility of small businesses and run incubators and accelerators to get their blockchain solutions to market.
Peer-to-peer Transactions and Payments
Distributed ledger technology (DLT) eliminates the need for trusted third parties, or intermediaries, like banks and agents. The approvals and processes performed by these traditional players are replaced by smart contracts.
The need for every human being to have a unique identity has been mentioned above. The only viable way of providing everyone with an ID in the minimum of time is via a digital ID, rather than conventional methods of issuing identity cards or physical passports. This is why digital identity is an essential component of DeFi.
The development of marketplaces that link buyers and sellers is one of the most popular DeFi use cases, relying on smart contracts to enable direct exchanges without having to go through an intermediary or a broker.
The Energy and Data Marketplace
Although energy and data can be regarded as merely alternate forms of currency, the development of the smart grid and the growing need for data to power communications via mobile and other devices has made this a critical market for consumers, especially in the developing world.
Borrowing and Lending
Financial markets have traditionally made their money by the differential between interest they pay to investors and savers and the rates at which they lend this money to borrowers. Stringent credit criteria exclude many borrowers from accessing funds or require guarantees in the form of collateral.
Originally, blockchain was all about cryptocurrency, but as the technology matures, the value of blockchain as a platform has been recognized. There are benefits to tokens beyond their use as a form of currency:
- They are fractional. With the current value of Bitcoin in the region of $23,000, a whole coin is beyond the reach of most would-be investors. However, anyone can invest in a few Satoshis, or 100 millionth of a Bitcoin.
- The design of the token and the purpose it fulfils can be tailored to fit the needs of its market.
- An Initial Coin Offering is an alternative way to raise funds for a startup, rather than approaching traditional lenders and markets.
Most organizations that have already implemented blockchain solutions now recognize the value of smart contract audit in mitigating these potential risks. Specialized smart contract auditors help optimize smart contracts and identify threats and anomalies in the smart contract code.
Source : https://www.finextra.com/blogposting/19770/6-use-cases-for-smart-contracts-in-decentralized-finance