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Fintech vs. DeFi Which Big Market Now?

Posted 21/01/22

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Financial technology vs. DeFi attracting a lot of attention for the business. Most people don’t fully understand the idea behind Decentralized Finance. But Decentralized Finance attracting a lot of attention for the next technology in Finance.

What is Financial Technology vs. DeFi?

FinTech is the abbreviation for financial technology. As it suggests, FinTech refers to technology that supports and improves financial transactions and processes.

If you conduct online banking or mobile banking transactions, you would have used FinTech — smartphone apps, algorithms, and software are all examples of FinTech. Additionally, broad definition of “DeFi” or “DeFinance” encompassing projects such as Lightning Network, Bisq, 0x, and Set Protocol.

Is DeFi Part of Financial Technology?

DeFi transactions can’t happen without a financial platform. Borrowers need to go somewhere to obtain funds, and these funds are received from people who deposit cash in accounts. Thus, decentralized lending platforms fall under the umbrella of decentralized apps (dApps) that connect borrowers and lenders.

In this way, a DeFinance works similarly to a financial institution. The dApp provides borrowers with funds. Funds are provided by people who open an account on the platform and deposit cash on it. Like a financial institution, deposit accounts accrue interest on the balance kept in the report.

What is the Difference Between Financial Technology vs. DeFi?

The difference between them in a Decentralized Finance environment, there is no intermediary between the borrower and the lender. Borrowers and lenders are connected directly.

Additionally, lenders can decide the percentage of their funds available for borrowing and the loan period. There are no minimum deposit periods to adhere to; the lender can determine how long s/he wishes to keep the funds in their account without penalty. Lenders can also decide on the collateral they are willing to accept for the loan. Digital collaterals can include other cryptocurrencies and digital assets. These include online game assets, documents such as title deeds, and more.

People who provide funds on a dApp for lending are referred to as stakers. In most platforms, stakers are rewarded with native tokens for keeping their funds on the platform to provide liquidity for other users. An advantage of being a staker & owning tokens of the forum is that these tokens become the ticket for the platform’s governance. Hence, stakers have a say in how the Decentralized Finance platform is governed.

Some things that stakers vote on are the interest rate on borrowing, the rate of incentive for token holders who provide liquidity, and what other dApps can be developed using the platform’s blockchain. This allows every one of the platform’s communities to control their funds and manage them.

Financial Technology vs. DeFi Which One is The Winner?

DeFinance Project Growth in 2021

Despite being early, some projects have already reached impressive numbers and growth.

  1. Lightning Network — a second layer payment protocol that operates on Bitcoin’s — has grown from 60 to over 3k nodes in 10 months, with over 11k open channels and $700k of overall network capacity.
  2. Augur — an open-source, decentralized, peer-to-peer oracle prediction market protocol built on Ethereum— just had a “market” related to the mid-term election breaking over 1M dollars.

Projected Global Mobile Payments Revenue Expected Growth

Mobile payments are expected to snowball in the next five years, registering a 250 percent increase in revenue from 2020 to 2025. The adoption of mobile payments is still low in some European countries. We expect a large amount of the next five years of growth from these regions. From a market point of view, Fintech users are still relatively low in some parts of Europe.

However, the fintech market will become a significant market leader in the European continent in the next few years. But you need to pay attention to Defi’s growth in making profits in cryptocurrency. The decentralized finance market size in May 2021, as measured by the amount of cryptocurrency locked, Increased by over 25 billion USD within a single week.

The rapid growth of DeFi makes investors look at the development of the market. However, from the point of view of the fintech market, blockchain technology will experience growth until 2030. This also coincides with data analytics which will become the market leader in financial technology.

Additionally, continuous with the blockchain technology found in Decentralized Finance, which has the advantage of managing data without a third party and transparency related to data. Based on this analysis, the DeFinance is a win for the market. Someday, it can replace traditional transactions.

Is DeFi the Next Big Thing?

Financial technology vs. DeFi which one is the best? Many investors believe DeFinance is the next of financial technology. With such massive development and growth, it can be said it can dominate the market. In addition, the driving factor for change is that transactions that occur are supported by more sophisticated security.

However, DeFinance has a greater risk of losses, and the transaction flow is unknown to whom and where. Even though it is supported by the transparency of transaction data, there are no regulations or regulations in the blockchain world. So that it cannot be known when someone has cracked the security code on smart contracts.

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